Thursday, August 25, 2011

Small Businesses Are Overpaying For Health Insurance

An article in American Economic Review has discovered that the majority of small businesses are over paying for small business health insurance.

The over payments are linked to the trouble some small businesses have comparing numerous quotes for health insurance, which increases the average paid by around 29%. Small businesses show a trend of switching policies frequently, something which can be costly. The suggestion is that policies offering similar coverage are being sold at a wide variety of prices, suggesting there is some obstacle to competition which would see most similar products sold at similar prices.

The massive variations in coverage offered by the insurance providers, alongside the different prices, makes the choice difficult for small businesses to find the best deal. The excessive policy switching also makes it difficult for insurers to price up the plans as it's not clear how long the customer will stick with them. These factors combine to create a volatile and ultimately costly marketplace where small businesses are the real losers.

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