Costs is the biggest problem for small employers offering and not offering health insurance
WASHINGTON, D.C. (March 23, 2023) – The National Federation of Independent Business (NFIB) released a new survey assessing small businesses and health insurance. The data reveals that small businesses are facing a substantial affordability crisis in providing health insurance for their employees. Most small business owners find it challenging to manage the cost of offering employer-sponsored health insurance and almost half have taken a lower profit or suffered a loss to pay for health insurance premium increases over the last five years.
“Health insurance has been a continuous challenge for small business owners,” said Holly Wade, Executive Director of NFIB’s Research Center. “The cost of health insurance is by far the biggest challenge for employers who offer health insurance and for those who do not offer it. Small employers compete for talent in filling open positions and are aware that health insurance is an important benefit for many employees and job seekers.”
Employer-Sponsored Health Insurance:
Over half (56%) of small employers reported that they currently offer health insurance to employees and 44% percent do not. Businesses with more employees were far more likely to offer health insurance with 89% of firms with 30 or more employees currently offering health insurance compared to 39% of those with 1-9 employees.
Of those currently offering health insurance, close to all (93%) offer group health insurance.
Of those offering group health insurance, 44% have offered health insurance since the beginning of the business. Eleven percent offered within the first year and 8% in the first 2-3 years.
Eighty-eight percent of small employers offer health insurance to only full-time employees. Ten percent offer health insurance to both full-time and part-time employees and only 1% offer it to only part-time employees.
Of those employers offering health insurance, 37% had most of their employees covered by a High Deductible Preferred Provider Organization (PPO) plan. A quarter had most of their employees covered by a Health Maintenance Organization (HMO) plan and another 9% by a Point of Service (POS) plan. Fourteen percent reported other and 17% were not sure. Eighty percent of firms offering health insurance do not offer a second type of health plan.
When asked whether their group health plan is Fully Insured or Self Insured, a little over three-quarters (77%) of small employers reported a Fully Insured Plan.
Fifteen percent of small employers have less than 25% of their eligible employees enrolled in their health insurance plan. Another 13% reported 25% – 49% of their eligible employees and 19% between 50% – 60%. Seventeen percent reported 70% – 89% and 10% of small employers reported 90% – 99%.
Sixty-five percent of small employers reported the most important reason they don’t offer health insurance is that it’s too expensive. Firms with 30 or more employees overwhelmingly (88%) reported this as the most important reason they do not offer health insurance, compared to firms with 1-9 employees (63%) and 10-29 employees (70%).
Nine percent of all firms reported that the most important reason they do not offer health insurance is because their employees have access to low-cost coverage in the government exchange marketplace or other government programs. Seven percent reported that many employees are part-time, seasonal, or have high turnover. Two percent do not offer health insurance because revenue is too uncertain and another 1% said the administrative hassle is too great.
Forty-two percent of small employers who do not offer health insurance to their employees do not anticipate offering it in the future. Almost half (47%) were unsure. For those who anticipate offering health insurance, 36% said the availability of more affordable health insurance options would prompt them to offer it. Nineteen percent said they would if the business was more profitable, 13% said if employees expressed interest in the benefit, and another 7% said less employee turnover.
Reasons for Offering Health Insurance:
Sixty-three percent of all employers believe offering health insurance to recruit and retain employees is very important or moderately important. Another 15% believe it is mildly important. As firm size increased, so did the degree of importance to offer health insurance to recruit and retain employees. Twenty-nine percent of firms with 1-9 employees reported it was very important and little over half (53%) of firms with 10-29 employees did. Almost three-quarters (72%) of firms with 30 or more employees believe it is very important.
Among employers who do and do not currently offer health insurance, 94% of firms who currently offer health insurance believe it is important to some degree compared to 58% of firms who do not currently offer health insurance.
Ninety-four percent of small employers find it challenging to some degree for their business to manage the cost of offering employer-sponsored health insurance. Forty-eight percent reported it being very challenging, 34% reported it as moderately challenging, and 12% reported it as mildly challenging.
Almost half (49%) of small employers have taken a lower profit or suffered a loss to pay for health insurance premium increases over the last five years. Forty-six percent of small employers have raised prices and another 36% have become more productive and efficient.
While cost is the most reported reason for not offering health insurance, cost is also a critical problem for those that do offer it. Almost all (98%) of small employers offering health insurance are concerned that the cost of providing health insurance to their employees will become unsustainable in the next 5-10 years.
When asked if small employers have considered offering their employees a tax-preferred reimbursement or a financial incentive to purchase health insurance on their own, over half (68%) reported that they have not considered it.
Purchasing health insurance through an agent is general practice for most small business owners. Eighty-eight percent of small employers purchased or renewed their employer-sponsored health insurance through an agent or broker.
Over a third (36%) of small employers purchase other business insurance or products through the same broker or agent. Sixty-four percent of employers have used the broker or agent they use to purchase or renew their current employer-sponsored health insurance for more than five years.
Eighty-two percent of small employers had a conversation with their broker or agent about options or alternatives to their current health insurance plan. Of those who had a conversation with their broker or agent, over half (63%) reported that their broker or agent brought up alternative plans.
Almost three-quarters (72%) of small employers were not at all familiar with the Individual Coverage Health Reimbursement Arrangement (ICHRA). A little over half (52%) reported that their broker or agent did not discuss this option with them.
Affordable Care Act/Regulations:
Thirty-eight percent of small employers said their business has been impacted by the Affordable Care Act (ACA). Sixty percent have not been impacted and 2% were unsure. When asked how the ACA has impacted their business, 12% reported that they had to begin offering health insurance to comply with the mandate, 8% offered more robust or different coverage to meet the mandate’s requirements, and 6% reduced the number of employees to fall below the mandate.
Close to all (94%) of small employers have never received a penalty notice or had a penalty imposed by the IRS related to violations of the employer mandate.
Personal Health Insurance:
The vast majority (94%) of small business owners have personal health insurance. Of those with personal health insurance, 38% have it through their business, 19% have it through the individual market, and 11% have it through their spouse’s employer.
Eighteen percent have their personal health insurance through Medicare, Medicaid, and/or Tricare. Two percent cited other, none reported short-term plan, and 13% were unsure.
Among those small business owners who purchased in the individual market, 30% purchased through the government exchange marketplace, 38% purchased it from a health insurance broker, and 30% directly from an insurance company.
Seventy-nine percent of small employers reported that they were interested in joining an association health plan to some degree. Twelve percent said they would definitely join, 23% would likely join, and 44% would consider joining.
About a quarter (27%) of small employers have talked with other small business owners about employer-sponsored health insurance over the last year. Seventy-eight percent reported that the cost of health insurance was the primary topic of discussion.
View the full survey here.