In the wake of the Affordable Care Act, while large employers are continuing to offer health benefits to their workers, many smaller ones are opting out, according to new findings by the Employee Benefit Research Institute.

The EBRI analysis examines the percentage of employers offering health insurance from 2008–2015 to better understand how health insurance “offer rates” have been affected by the ACA, the 2007–2009 recession, and the subsequent economic recovery. The data come from the Medical Expenditure Panel Survey–Insurance Component (MEPS-IC).

EBRI finds that among larger employers, health insurance offer rates — the percentage of employers offering health insurance benefits to their workers — have been steady for: (1) employers with 1,000 or more employees, around 99%; and (2) for employers with 100–999 employees, in the 92.5% to 95.1% range.

But offer rates among smaller employers have been falling since 2009 for: (1) for employers with fewer than 10 employees, from 35.6% in 2008 to 22.7% in 2015 (a 36% decrease) (b) employers with 10–24 employees, from 66.1% in 2008 to 48.9% in 2015 (a 26% decline); and (c) employers with 25–99 employees, from 81.3% in 2008 to 73.5% in 2015 (a 10% decline).

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8 responses to “Small Companies Are Dropping Health Benefits”

  1. I think it is great that small business employers can now focus on running their business instead of being in the healthcare benefits business. It would have been helpful to know the real impact to employees if this article had included information on the companies that are no longer providing benefits are instead providing additional compensation for employees to buy benefits in the marketplace or doing nothing at all.

    • Very interesting thought. Did these employers see net cost savings by shifting the burden of obtaining insurance to the employees? Did they increase employee compensation by at least the same amount of savings from eliminating the benefits? I suspect the decision to stop offering health benefits had less to do with eliminating a management distraction and more to do with improving the bottom line. It’s a very rational decision which I don’t necessarily disagree with but let’s please be honest about the motives. The ACA did benefit many people but there is also a growing dark side of unintended consequences that is taking time to develop. The worst is yet to come I’m afraid.

      • I can tell you why we have stopped offering benefits. It does have to do with the bottom line. Bottom line is without cutting the increased expense then we cannot survive. I am a small business owner….medical in fact….and with rising insurance cost due to ACA we are no longer able to provide health insurance to our employees. And no we did not raise their pay by the amount we saved. We did not line our fat pockets with that money….we used that money to survive and actually take home a normal paycheck. I have been on half paychecks for months thanks to declining reimbursements and increased expense. Yes they could protest and raise issues with it but what it comes down to is if you want a job then deal with it. If you don’t want a job then sure raise a stink about no benefits, because with them I would be broke, and broke don’t pay no bills.

        • MD – that’s tough. Given the circumstances you are outlining, I’d say yours is not an attractive place to work. Hope you can retain the employees you have. Any issues with loyalty from your employees? Seems like a pretty grim situation for the people working for you.

  2. MidLevelExec, you’re right that dropping coverage largely has to do with saving money, but there are odd pieces of the ACA in play with these decisions. In some cases with low wage earners, an employer might actually help the employees by dropping health insurance if the employees are eligible for subsidies at the Exchange (if employer provides a certain level of coverage, the employees are ineligible for subsidies).
    I wouldn’t discount the benefit of getting rid of the distraction. The admin work and simply being in between the employees and their carrier/healthcare can be a huge distraction.
    It’s all about compensation, so make up for the lack of health insurance in cash. I’m curious how many employers make the employees whole from a tax perspective because the cash comp will be taxed, unlike the employer’s contribution to health insurance. That tax issue is probably the biggest thing holding back more small companies from dropping coverage.

  3. Yet another government program that threatens small business in America and taking more protection away from the employee…. sure companies have to survive, but if employees are covering their families on their own you will see them leaving these small companies who’s benefits are reduced to work for large companies that can afford health coverage for their workers….

    • Deborah, I appreciate your position on this matter. We are a small, healthcare company with a higher than average wage in our region. We also pay 100% of the employee only coverage of health, dental, vision, and AD&D. WE feel that taking these worries away from our employees allows the employee to focus on working and being loyal to the company and their families. When they think that the “grass is greener on the other side” and research the package at other companies they see that we offer an above market compensation package. Yes it costs the shareholder some bottom line, but the benefit is a loyal workforce with little or no turnover. I agree with our CEO / Shareholder on this position.

      • Our company takes the same viewpoint…I guess that is why we have had ZERO turnover and have increased profits YOY for the past 5 years. Why can’t people understand that if you treat people right your business will flourish and if you treat people poorly, you’ll lose in the end.

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