Small businesses feel the pinch on insurance

While workers are being asked to cover more of their health costs, employers generally still pay the lion's share of their insurance premiums.

Employees of small businesses have access to fewer benefits than colleagues at large ones, a recent Small Business Administration study found.

A Zoomerang survey of 98 Richmond-area small businesses last week found that 59 percent provide health insurance for their employees. Fifteen percent reported that the coverage cost their business 10 percent of sales revenue. Some reported that more than 15 percent of sales revenue went toward insurance.

David Gallagher knows how the cost of insurance affects a business. He is president and CEO of Dominion Payroll Services, which processes payroll for about 800 clients.

"The cost is squeezing revenue," he said.

Making things tougher for business owners is new legislation that forces them to pick up 65 percent of COBRA payments for employees they lay off. The businesses get tax credits in return.

Gallagher said his health costs have gone up 22 percent in the past year. He said business owners have two main options. They can get creative with the coverage they provide -- for instance, they can look at policies with higher deductibles, and smaller-business owners can offer to pay for an employee's individual policy -- or they can pass along the cost to employees.

"It's very difficult to pick it up from employees," he said.

Donelson "Donnie" Caffery, owner of Good Foods Grocery, said he has been forced to pass along some of the costs.

"I want to pay as much as I can, but we have to cap it," he said.

Caffery said that 10 years ago, the cost of his company's health coverage was creeping toward 1 percent of sales. That has grown to 5 percent.

"It's a huge burden," he said.

Good Foods employs about 40 people, 15 of whom get health coverage from the company.

In the past, he would pay 100 percent of the coverage, but now employees pay a share depending on the policy cost, which can fluctuate depending on how many people are on it.

"Until the insurance culture changes, we have to do this," he said.

Contact Louis Llovio at (804) 649-6348 or .