Rate increases for employee health insurance, which rose again in 2005 – 9.8 percent as opposed to the whopping 11.2 percent in 2004, present business owners with grim choices, according to the SmartMoney.com. Small businesses considering dropping coverage could lose talented employees, as well as normal access to a pool of potential employees. But the overall cost of providing insurance, currently 14.6 percent of an employee’s wages, according to the Chicago Tribune, may just be too high.

Those costs can be reduced significantly, says Todd McCracken, president of the National Small Business Association, if business owners shop around from carrier to carrier, share some of the costs with their employees, and pool with other small businesses to purchase insurance according to SmartMoney.com. Employers can ask employees to cover some of the rate increases, or cover part of their premiums.

By shaving benefits employers can keep their premiums at the same price, John Nelson, Jr. co-CEO of Warner Pacific told SmartMoney.com. Increasing the co-payment from $30 to $40 on a Blue Cross of California plan can decrease a monthly payment by 13 percent, Nelson says. Cutting out coverage for brand name medications can cut premiums by 28 percent.

Higher deductibles can help to save on insurance in a big way, and can be made less painful for employees if the employer offers Health Savings Accounts, according to SamrthMoney.com. Other options employers can consider are medical reimbursement plans and offering to compensate employees who decline insurance, says The Chicago Tribune. Some employers ask their employees to enroll with a spouse’s insurance plan.

Under traditional employer-provided health care plans, employees don’t really understand the cost of their health care, says Charles Frame of Emory University, Director of the Center for Healthcare Leadership in a Knowledge@Emory report. Health Savings Accounts encourage employees to save money to pay everyday medical insurance, and have the effect of making employees health care consumers, who are much more aware of the costs of services, Frame Says. These Health Savings Accounts are backed by the Bush administration and would be supplemented by a high-deductible insurance policy that covers catastrophic expense.

A coalition of small business owners, Pennsylvanians for Small Group Health Insurance Reform is supporting legislation to eliminate medical underwriting of health insurance in Pennsylvania, PRNewswire reports. A similar bill, written to help regulate the health insurance market for small business, has already passed in New Hampshire, the report says.

The Small Business Health Fairness Act that passed recently in the US House of Representatives, but remains in committee in the Senate, must not be all bad, George Dale, Mississippi’s State Insurance Commissioner, told REDNova, because all four state representatives voted for it. The bill supports the formation of Association Health Plans, regulated by the Labor Department, through which small businesses could enter national pools to purchase health insurance. Mississippi’s Senator Trent Lott has concerns, however, and declined to co-sponsor the bill, the REDNova report says.