Small businesses are being hurt, sometimes disastrously, by whole life insurance policies they provide for employes but which don't disclose the rate of return, a Federal Trade Commission attorney is scheduled to testify today.

Many businesses buy life insurance policies for their employes to fund the employe's pension plan as well as to provide benefits for the worker's benificiaries if death occurs, according to David Fix, attorney for the FTC. But because the insurance companies don't disclose the rate of return on those policies, the small business can lose millions of dollars over a long period of time.

Often, the employer could have gotten a higher rate of return elsewhere, if the usually low insurance policy rate had been disclosed, Fix said.

Another problem arises. Fix said, when there is high employe turnover. Because payments made on the policies for the first few years mainly go toward insurance company costs, firms with high employe turnover must repeatedly buy new policies while getting no return, Fix said.

Fix is one of several persons from government, the insurance industry and small business to testify today before the House Small Business general oversight subcommittee on insurance problems faced by small businesses.

The series of hearings to be held during the next several weeks is intended to explore the "affordability and availavility of insurance, marketing, pricing and claims settlement practices as well as rate-setting procedures," of the insurance industry, according to Rep. John J. LaFalce (D-N.Y.).

Fix said yesterday that often the rate of return on the whole life insurance policies is about 4 or 5 percent, but insurers don't disclose the exact amount. p

Whole life, also known as ordinary life or straight life is a commonly held policy for small-business people. It remains in force as long as premiums are paid and offers full benefits upon the policyholder's death. In addition savings accrued can be collected by the customer surrendering the policy before death.

"If a small business chooses to fund his (pension) plan with individual whole life insurance, he loses," Fix said. "A lot of people get trapped in savings vehicles yielding 3 or 4 percent."

In the health insurance are, a representative of the National Federation of Independent Business is scheduled to testify that the high cost of health insurance has prevented many small business from providing coverage for their employes.

According to an NFIB survey, only 16 percent of firms annually grossing less than $100,000 provide health insurance. But 92 percent of those firms grossing more than $1.5 million do provide such coverage.

Excluding the employe's contribution an average small business annually grossing between $200,000 and $349,000 pays a monthly premium of $396 or 3 percent of gross, the NF1B said. Small business annually grossing between $800,000 and $1.5 million pay an average monthly premium of$958, of about one percent of gross.

hree-eighths of all small businesses pay more than $80 per employe in monthly premiums, the NFIB said.