Small Businesses Count on Health Coverage to Attract Workers

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Despite ongoing concerns about rising costs, many U.S. small-business owners continue to view employee health coverage as a vital incentive for attracting and retaining quality workers in an historically tight labor market, according to new eHealth survey.

The U.S. Department of Labor’s July 5 jobs report showed the U.S. economy added 224,000 jobs in June, the most since January and up strongly from a disappointing 72,000 new jobs in May. The gains extend the longest streak of job creation in modern times to 94 months. Although unemployment ticked up to 3.7 percent after two successive months at 3.6 percent, the rate continues to hover near that 50-year low and is down from a peak of 10 percent at the height of the Great Recession in October 2009.

For many small businesses, employer-based health coverage provides a critical edge for attracting and retaining employees, a recent survey by eHealth reports. The survey found 66 percent of small business owners offer medical benefits to help them hire and retain the best employees, and 43 percent feel a moral obligation to offer health benefits.

Among small businesses that offer health insurance, 27 percent feel it encourages productivity, while 11 percent provide coverage for the tax benefits available to them, the survey found. More than eight in 10 small businesses are happy with their coverage; just seven percent said they were somewhat or very unhappy with coverage.  

The eHealth small business survey also revealed that:

  • Small business health insurance costs are more stable than coverage in the individual market: While average premiums for unsubsidized individuals who bought their own coverage at eHealth jumped by 58 percent between 2015 and 2018, the average per-person premium for small business coverage increased by just 5 percent during the same period.
  • Average small-business premiums were down slightly in 2018, but deductibles increased: The average per-person premium for small business health insurance plans decreased 2 percent between 2017 ($416) and 2018 ($409). However, the average individual deductible for small business plans increased 14 percent in the same period (from $2,754 to $3,140).
  • Group size can make a big difference in premiums. In 2018, the average monthly premium for groups with five or fewer employees was $419 per covered person. In contrast, the average monthly premium for groups with six to 29 employees was $364, or 13 percent less. Deductibles, however, were essentially the same for both larger and smaller groups at $3,140-41.
  • Most small businesses are concerned about costs: 83 percent of survey respondents expressed concern about future health coverage cost increases, and 63 percent said an increase of 15 percent or less in monthly premiums would make their current plan unaffordable.
  • Most small businesses worry about employees’ ability to afford the cost of coverage and care: 77 percent were either very concerned (39 percent) or somewhat concerned (38 percent) about employees’ ability to afford premiums and deductibles.

Health insurance premiums typically are paid with both employer and employee contributions in the small business market. The average number of employees for small businesses purchasing health insurance plans through eHealth in 2018 was 3.9, an increase from an average of three employees in 2017.

Most employers believe offering coverage has not harmed their ability to hire and reward workers, with more than half (53 percent) of respondents saying that sponsoring a health plan has not prevented them from offering raises or hiring additional workers. Conversely, 30 percent said offering coverage has made it harder for them to increase employee wages or hire additional workers.

For more on costs, trends and insights in the small business health insurance market, read the report.

 

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