About the Percentage of Small Employers Providing Health Insurance

The size of the company you work for may determine whether you get health insurance and how much you pay for it. Most Americans who work get health coverage for themselves and their families from their employer. Small employers are much less likely to offer health insurance, however, usually because of the cost of the coverage.

Significance

• Small employers often struggle to provide health insurance to their employees. According to a report from the Kaiser Family Foundation, 63 percent of employers offered health benefits in 2008. Small employers were much less likely to offer coverage. Research shows that 99 percent of large employers (more than 100 employees) offer health benefits, compared with 65 percent of smaller firms. Only 49 percent of companies with fewer than 10 employees had a health benefits package.

Time Frame/Trends

• According to the Kaiser Foundation, the percentage of large employers offering health insurance held steady at more than 98 percent between 1999 and 2008. Smaller employers, in contrast, saw a decline from 65 to 59 percent between 1999 and 2007, although this number increased to 62 percent in 2008. Employers with fewer than 10 employers were most likely to drop health insurance. The percentage of these employers offering coverage fell from 56 to 49 percent between 1999 and 2008.

Barriers

• According to the Agency for Healthcare Research and Quality, cost and employee turnover are the most common barriers for small employers interested in offering health coverage. Small companies often face higher premiums than large employers, particularly if the employee population is older or sicker than the general public. According to AHRQ, many small employers choose not to offer health coverage in order to offer higher wages or to avoid increases in business costs.

Mandates

• Several states have passed legislation to assist small businesses in offering health insurance to employees. According to AHRQ, there's no evidence that these efforts increased the percentage of employers offering health coverage. This suggests that even more affordable health insurance is not an attractive option for many small employers.

Outlook

• According to the U.S. House Committee on Small Business, health insurance premiums for small firms have doubled since 1999. This trend is expected to continue. The Kaiser Foundation found that most small employers do not plan to discontinue coverage as premiums rise; however, they do plan to pass a large percentage of the cost increase to their employees.

Reform

• The National Small Business Administration has come out in favor of health care reform, which would equalize costs for employers of all sizes. The NSBA states that health care reform is needed as costs spiral beyond the reach of many small employers.

Positive Impact

• According to AHRQ, owners of small businesses that offer health coverage cite many advantages, including increased retention, easier recruiting of new employees and increased productivity. Small employers who do not offer health benefits generally report higher turnover rates, although this could be related to the nature of the businesses and not the availability of health coverage.