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The proportion of small businesses offering health insurance has declined dramatically over the past 30 years due to rising medical costs and the emergence of other options. However, some employers may be willing to pay for the benefit because it makes it easier to attract and retain employees.
According to the Employee Benefits Research Institute (EBRI), the proportion of employers with 25 to 99 employees providing health care has fallen from 81% in 1996 to 77% in 2023.
This fell from 65% to 52% for employers with 10 to 24 employees, and from 34% to 23% for employers with fewer than 10 employees.
The study found that the decline in coverage among small employers accounts for the overall decline in employers offering benefits. The proportion of the nonelderly population receiving employment-based health benefits was about 70% from 1970 to 1989, but by 2023 it had fallen to 60%.
Employer spending on health care is expected to rise 8% next year, the fastest growth in nearly a decade, according to a report from the Business Group on Health. Employer health care costs “have increased cumulatively by 50% since 2017.”
The passage of the Affordable Care Act in 2010 gave new options for purchasing health care, allowing employers to stop offering the plan as part of their benefits program, EBRI said. said Paul Fronstein, Director of Health Benefits Research.
“We have options that we didn't have before. If your employer doesn't offer coverage, you can go to the ACA exchanges and get coverage,” Fronstein said. “Small employers may say, 'We don't need to do this anymore.'”
But Nick Trimper, senior economist at Gust, said many small employers believe offering health benefits is the right thing to do. It can also help with business goals such as attracting workers.
“Small businesses that offer health insurance are doing it because they think it's the right thing to do,” Trimper said. “They want to provide this benefit…but current policies may actually make it more difficult for them.”
A study by Gusto, which handles benefits for employers, found that small businesses that offer health insurance are more likely to hire employees than small businesses that offer benefits but no health insurance. They are 13% more likely to be found. Additionally, small businesses that offer health insurance are 25% more likely to say their employees are performing better than expected compared to companies that offer benefits without health insurance. Masu.
Three-quarters of small businesses offering health insurance said they want their next president to address the cost of providing benefits, according to a Gusto survey.
Trimper said the federal government could help small businesses provide health insurance. For example, he said, employers with fewer than five employees cannot currently participate to purchase health care.
“Allowing small businesses to form small employer groups is another opportunity to make it a little easier for people to provide benefits like health insurance that employers want. That's true,” Trimper said.
