Smallest firms experienced the highest rate of growth in health insurance costs between 2000 and 200

A new Rand Corporation study, "The Economic Burden of Providing Health Insurance: How Much Worse Off Are Small Firms," found that the percent of payroll dedicated to health insurance increased by nearly 30 percent for firms with fewer than 25 employees between 2000 and 2005.  This rate of increase was greater than what firms between 25 and 49 employees (16%) and firms between 50 and 99 employees (25%) experienced (Source: Economic Burden of Health Insurance Increasing for Small Employers Providing Health Insurance, Rand Corporation, April 4, 2008).   

By 2005, firms with less than 25 employees were spending 10.8% of payroll for health benefits, up from 8.4% in 2000.  Even with this increase in costs, the study found that these firms showed no greater likelihood of stopping providing coverage to their workers than firms with more employees.

The study did find that these small firms offered plans of slightly lower quality.  They were less likely to offer drug and dental coverage and more likely to have higher deductibles and coninsurance rates.  According to the report, the average worker at firms with less than 25 employees spent 1.9% of their income on medical expenses compared to 1.3% for workers in firms with more than 100 employees.