Small Employers Cut Back Health Coverage in Economic Slowdown

October 2, 2008 ( - As business owners scramble to cut expenses In light of the slowing economy, health care coverage has taken a hit, a new American Express OPEN Small Business Monitor has found.

A news releasefound the number of business owners who offer health care benefits to employees has dropped to 54% from 66% this spring and 71% in fall 2007. This comes despite nearly two-thirds of bosses agreeing it is important to offer employee health care coverage – down slightly from 69% in fall 2007.

According to the announcement, the poll found that manufacturers are far more likely to offer health care benefits. More than half (58%) offer health care coverage to their employees (compared to 54% of services companies and 49% of retailers).

American Express said manufacturers are also more likely to have shopped for a new insurance carrier (24% versus 15% of services companies, 14% of business owners overall, and 10% of retailers) or required their employees to pay a larger share of health care costs (13% versus 5% of business owners overall, and 4% of both retailers and services companies).

Hiring Plans

Meanwhile, according to the news release, hiring is part of the game plan for one-third of entrepreneurs this fall (36%), just below 38% this spring and up from 31% last fall. Four in ten business owners (44%) in the services sector have plans to hire over the next six months (versus 30% of business owners in the manufacturing sector and 28% of businesses in the services sector).

Overall, seven in ten entrepreneurs with hiring plans (72%) say they need to hire to handle their growing business.

The announcement said more than half of the entrepreneurs with hiring plans (57%) will hire to help increase business volume. Nearly four in ten businesses overall will hire because they need seasonal help (38%), one-in-three say they will hire because they have a new business venture (34%) or they have finally found the right candidate for the position (31%).

“The economic news of the last several weeks is shaking every business owners’ view of the economy,” said Susan Sobbott, president American Express OPEN, in the announcement. “Entrepreneurs are nimble and have strategies in place to manage business challenges. They are decreasing investments, adjusting expansion plans to capital on-hand, cutting expenses and focusing on adapting to customer demand.”

In general, three quarters of business owners plan to grow their businesses over the next six months, but keeping and maintaining current business and sources of revenue has outpaced growth as the top priority for entrepreneurs.

To help retain their current sources of business, the poll found, entrepreneurs will place a heightened focus on better servicing customers to set their business apart from competitors.

American Express OPEN Small Business Monitor, released each spring and fall, is based on a nationally representative sample of 768 small business owners/managers of companies with fewer than 100 employees. The survey was conducted via telephone by Echo Research from August 12 - August 25, 2008.