Health benefits are the number one fringe benefit, and yet while nearly all (98%) of larger employers offer health benefits, only 46% of medium and small employers offer health benefits. The smaller the employer, the less likely they are to offer health benefits. Of micro employers (3-9 employees), only 44% offer health benefits. So, why do small employers offer health benefits?
Note: This article is an excerpt from our new eBook, Employer Health Insurance Facts & Figures, 2014-2015 (click here to download the guide).
Why Do Small Employers Offer Health Benefits?
According to a recent survey by eHealth, most small employers offer health insurance because of a moral obligation (44%) or to recruit and retain talented employees (33%).
In other words, small employers offer health benefits because they care about their employees, and because health benefits are a powerful tool to attract and keep the best employees.
Why Don't Small Employers Offer Health Benefits?
So if health benefits are such an important recruiting and retention tool, why don't all small employers offer health benefits?
According to Kaiser Family Foundation, of small employers (3-199 employees) who do not offer health benefits, the number one reason is cost (32%), with other reasons including: employees are generally covered under another plan (24%), the firm is too small (17%), and employees have other options, including exchanges (10%).
Evidence of these challenges is the declining rate of small employers who offer traditional group health insurance.
In just the past four years, the percentage of employers that offer health insurance dropped from 69% in 2010 to 55% in 2014. Among micro employers, the percentage that offer health insurance dropped from 59% in 2010 to 44% in 2014.
What Small Employers Want With Health Benefits
When it comes to what small employers want when they shop for and compare health insurance, it's not surprising then that the top two features they look for, according to the eHealth survey, are affordability (95%) and richness of benefits offered (68%). And, 72% of small employers ask their employees all the time, or sometimes, about their opinion on health benefits
What's the bottom Line? Small employers want to provide health insurance to employees, but affordability is a major barrier.
A Better Small Employer Health Benefits Solution
With health reform changes, there are new advantages of individual health insurance. Compared to traditional small employer group health insurance, individual health insurance is now a better solution for small employers because:
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Employees keep their plan when they switch jobs
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Employees choose the specific network (preferred doctors, clinics, etc.)
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Employees choose the level of coverage they need, specific to their family's medical needs (deductible, co-pays, co-insurance, etc.)
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Individual health insurance, on average, costs up to 60% less
Additionally, there are new individual health insurance reimbursement arrangements where employers can give employees money for their individual health insurance premiums. Because of these advantages of individual health insurance and the availability individual health insurance reimbursement arrangements, experts predict that most (if not all) small employers will transition employees to individual health insurance in the coming years.
Why do you think small employers offer health benefits? Or, what challenges do you see in offering health benefits? Leave a comment below.
