EBRI Sees a Rebound in Small Employers Offering Health Coverage

Over the last year, perhaps with the strengthening economy and lower unemployment rates, there is evidence of what may be a rebound in employment-based health insurance coverage offer rates among firms with 10 to 999 employees, according to an EBRI Notes article from the Employee Benefit Research Institute.

Since passage of the Affordable Care Act (ACA), smaller firms have shown a steady, though not precipitous, decline in offer rates. However, from 2015 to 2016, for employers with 10 to 24 employees, those offering health benefits increased from 48.9% to 49.4%.

For employers with 25 to 99 employees, those offering health benefits increased from 73.5% to 74.6%, EBRI finds. And, for employers with 100 to 999 employees, those offering health benefits increased from 95.1% to 96.3%. For these employers, this trend actually began a year earlier, when the offer rate increased from 92.5% in 2014 to 95.1% in 2015, EBRI says.

Prior to this rebound, for many smaller employers, the business, labor/employment, and health care environments all tended to shift the cost-benefit calculation against sponsoring health coverage. In 2016, circumstances appear to have tilted for some small employers, making it more advantageous to offer health coverage.

According to EBRI, with respect to health insurance premiums, for the last few years, premium increases have been relatively low and less volatile. With respect to the economy and the labor market, the unemployment rate has continued to trend down. When unemployment is low, recruiting and retaining workers becomes a bigger challenge for employers, including some smaller employers, which in turn often means improving compensation and benefits, EBRI says.

For the future, EBRI suggests it’s possible certain public policy changes, if adopted, may drive some employers—larger and smaller employers alike—away from offering health benefits and cause some workers to care less about whether they get health coverage from their employer. For example, several tax and health reform proposals would modify the tax exclusion of employment-based health coverage for workers by applying a cap, not allowing the exclusion against the highest marginal tax rate, or converting the exclusion into a refundable/nonrefundable tax credit.

In addition, some versions of the tax credit approach would make the same credit available to all individual taxpayers (not just workers) with respect to not only employment-based health coverage but also health coverage purchased in the individual market. 

According to EBRI, while there are many reasons to expect employers to move away from offering health benefits, there are also reasons to expect employers to continue offering them. Large employers may continue to sponsor their own health plans because of the concern that employees and their dependents may be impacted by continued volatility in both choice and premiums in the non-group market. Employers may also be hesitant to move away from offering coverage because of the uncertainty of repeal of the ACA and what that might mean for the availability of non-group coverage.

Finally, employers may be hesitant to move away from offering health coverage simply because of the strengthening economy and lower unemployment rates, which make it more challenging to recruit and retain workers.