The key factor here is subject distance.
Aperture and focal length play a part, but nowhere near as much as subject distance. Your photo is a very good example of this effect. Due to the small sensor and short focal length in your camera you will have difficulty getting a blurred background in most circumstances. If you were to upgrade to a DSLR then you could use longer focal lengths (for the same field of view) which would help you get blurred backgrounds. If you were then to upgrade the kit lens to a prime (going from f/5.6 to f/1.8) that would help you blur backgrounds more, but still not in every circumstance. Or you could keep your current camera, not spend another dollar and just get close to your subject for nice blurred backgrounds every time.
In fact once you get really close then there's no way to avoid getting a blurred background, whatever camera/settings/lens you use, a fact which is the bane of macro photographers!