Small employers dropping health benefits
Employees who work at small organizations historically have been less likely to have employer-sponsored health insurance. But that’s even more the case these days.
According to new research out this week from the Employee Benefit Research Institute, more and more small companies are getting out of the healthcare game in wake of the Affordable Care Act.
The percentage of employers with fewer than 100 workers that offer healthcare benefits to their employees has declined an average of 24%, reaching as high as 36% for companies with fewer than 10 employees. Meanwhile, health insurance offer rates among larger employers have been holding steady.
Even though the ACA exempts employers with fewer than 50 employees from providing healthcare benefits, it created health exchanges for those employers to help their employees obtain healthcare.
But exchanges, says EBRI study author Paul Fronstin, simply “haven’t taken off. Just because you create something doesn’t mean [employees] will use it.”
He says some individuals will choose to work for a small business because they have insurance elsewhere, or simply would rather pay the penalty than the premium.
Although small businesses are historically less likely to sponsor health coverage due to higher and more volatile increases in health insurance premiums, Fronstin postulates that a variety of factors — such as rising or fear of rising healthcare costs, attitudes toward the ACA, the Great Recession, unemployment and labor uncertainty — support decisions to eliminate health plan sponsorship.
That data comes from the Medical Expenditure Panel Survey-Insurance Component (MEPS-IC), which shows offer rates from the beginning of the Great Recession in 2007 to offer rates impacted by the ACA and subsequent economic recovery as of 2015.
Fronstin also notes that small businesses are less likely to report linkage between employee-based health coverage and worker attraction and retention.
For example, between 68-80% of small employers not offering health benefits report that the decision has no impact on employee recruitment, retention, attitude and performance, according to the report.
The climate, he says, creates a greater cost and risk for small businesses to provide their employees with healthcare.
Large employers holding steady
As employees at small businesses see a decline in healthcare offers, large employers have stayed the course by continuing to offer health benefits.
The ACA requires employers with 50 or more employees to provide health insurance or face penalties; between 92.5% and 99% of employers with more than 100 workers offer health insurance benefits, according to research from EBRI. However, large employers are already moving from defined-benefit to defined-contribution approaches that include more cost-sharing and adopting wellness programs, according to the report.
Other public policy changes, such as the Cadillac tax, could shift a larger share of healthcare costs to employees. Health benefits, which are fully tax deductible, will be taxed 40% under the Cadillac tax.
“It has a lot of employers thinking twice about what they’re going to do,” Fronstin says.