em perform Introductio in sm explain why som either too few e benefits plan as a result of e Em References generally cannot deduct 100 percen ployers reported that they ployers not offering health benefits are m all f 49 em ance, 66 percen irm n s are less likely to be o ploye meployees took coverage when firm es, firm s do not offer workers he t each repo s that do not offer health bene mreduced or elim ployee dem rt an im t of their health insurance ffered health apact nd o inated pay ra and 40 percent said they would do so if it re on the health of their em offered or because em likely than those offering them alth benefits in spite of experiencing an benefits th fits tend to be sm ises or bonuses, reduced other anprem workers in ium ployees did not want s. In addition, 38 ployees and the large f aller than those that do. to have a irms, it is Small Employers and Health Benefits: Findings From im it, and 14 percent reported that em percent did not know that em im Christensen, Rachel. “V overall success of the business, 54 percent stat im sm emportant to understand why s proved recruitm pact on their bus aller proportion of full-tim ployee benefits, or put off equipm In addition, em Employment-based health insurance is ent and retention. iness as a resu ployers not offering benefits are alue of Benefits C ployees do not e em mall employers ar lt ployees, and ployees had coverage elsewhere. ofe not offering health benefits. nt and other purchases. Som onstant in a Changing W pay tax on the share of prem Figure 5 e offering health benefits has an im by far the most common for employers that do not offer health benefits e less likely than large employers to offer more than twice as likely to have annual e o e rld: Findings from mployers also ium m of health s paid by pact on Figures F F F iigur gur igur e 11 e 13 e 8 Figure 19 Figure 16 Reasons for Offering a Health Plan, 2000 & 2002 the 2001 EBRI/MGA Value of Benefits Survey.” insurance co health benefits, and what m absenteeism their em have a larger proportion of fe reported that they either were not able to gross revenues of less than $500,000. ployer. However, em .verage in th e United States. Mo ight m m ployers offering ales, work otivate m hire needed workers or ers under age 30, and m ore re th health benefits were m sm an 100 m EBRI Notes, all employers to offer health benefits to illion workers, or 74 percen no. 3, (Em they laid of inority employees. uch more likely to ployee Benefit f some t of the 2002 Small Employer Health Benefits Survey Likelihood of Offering Health Benefits in the Future, Among Emp Ple o F rcentage of W yiee T rm Siz urn e o ov fer By Emp orkforce P l W oyh ers in ethe a Figure 22 r Emp id Less than $15,000 A Samp lo le, b yer O y Healt ffers Healt h Ben nnually h ef Ben its, 2002 e, 2002 fits, 2002 Business Offered Health Plan in Past, Among Employers Not Research In be aware of this prov the adult working population, were covered by workers. Tax Incentives Reasons for Worker Characteristics Even am workers. Overall, 43 percent of the em The likelihood of reporting an im ong firm stitu Not Offerin te, M s with three to 49 employees, ision in the tax code arch 2002). g Benefits ployers pact is hi than those not offering. in our sam employm firm gh s that do not offer health benefits tend er foe r larg p nt-based health benefits in 2001 le reported that the cost of er than Seventy percent of for smaller firms, Employers Not Offering Health Benefits, b Major Reason y Selected Indicators Minor Reason Likelihood of Offering Health Benefits if Government Provided Offering Health Plan, 2000 & 2002 100% 100% Figure 3 em (Fronstin, 2002b). Overall, the em but even am to be sm health b 100% ployers offering health benefits understood This testim In general, sm Financial co The incom e aller than those that nefits affected s ong those with two to nin e ony presents findings from of workers in firm ncerns, tog all e om mployers support tax e do. In addition, em aspect of their ether with the avai ploym es worker not offering ent-bas business other than the ac the 2002 Sm s, m that the em breaks to reduce the health insurance ployers no ed health benefits system lability of coverage elsewhere, are the a health benefits tends to be jorities in ployer' all Em t offering benefits are m dicate that o spl share of the prem oyer Health Benefits tual health benefits. ffering health covered m oium re ore • Many small employers that do not offer health benefits are potential purchasers. Eleven by Paul Fronstin, EBRI Various Tax Breaks to Re duce Health Insurance Costs, Amo ng 2000 2002 2000 2002 Employer Offers Health Employer Offers Health Benefits Benefit Design Changes Between 2001 & 2002 Employer Offers Health Benefits 90% 85% 90% Extremely or Somewhat Not Too or Fronstin, Paul. “Trends in Health Insuran was not included in an employee' Survey (SEHBS). It is based on work found in Fronstin and Helm costs of low-wage workers. More than half reasons m benefits has an im consider than 162 m than twice as likely to have annual gross revenues of less than $500,000. The survey also found that 21 percent of th percen ably oillion Am st frequently m lower than worker inco t are either extremely or pact on each of th ericans under ag entioned for not offe s taxable income, com ese issu m e 65, or 66 p e very likely to start offering h in f ce Coverage: A Look At Early 2001 Data.” e employers not offering health benefits es i(58 percent) of employers surveyed strongly rm . According to Figure 6, 6 ring health benefits to em s that ercen do offer t of the nonelderly population. pared with 48 percent am health benefits. Nearly 50 an (2003). The ealth benefits in the next two 3ployees. Nearly percent of those ong Offered Health Plan in Past 2000 Benefits 90% It is the right thing to do. Employers Not Offering Health Bene 71% fits, 2002 77% 2002 17% Figure 1 15% (Among Employers That Made Changes) very likely Likely Not at All 2 em testim with two to nine worker favor tax breaks that they could use to redu percent of employers not offe 80 percent of e reported of ployers not offering health benefits. ony also presents a com fering them mployers not offering health beYe soms 12% s say it h e tim ring health benefits, pay a parison of e within th as either a m the 2002 survey to data collected in 2000. ce health insurance costs for their low-wage e la anefits report that a m jor or m st five years, with m inor impact on em nnual wages of less than $15,000 o are than 40 percent jor or m21% ployee inor reason The Health Affa Public program years, and 2 Finally, em irs. Vol. 21, no. 1 (January/February 2002a): 188 s?ployers such as Medicaid, Medicare, and Tricare 2 percen ? t are som especially sm ewhat lik all em ely to start offering health benefits. ployers?are sens ? -193. covered 15 percent of the itive to the rising cost 80% It helps with employee recruitment . 58 45 22 30 8080% % Employer Does Not Offer Likely Percent of Employers Paying Various Pr Ee mm ployer Does iums Not Offer Health Benefits 80% Employer Does Not Offer Health Benefits No 86 79 It increases loyalty and decreases turnover. Health Benefits 53 52 27 26 survey exam per year to 40 percent or more of their em workers (Figure 21). A recruitm for not offering them reporting that the business decided to While the S ent, com ines a num pared to 85 percent am EHBS found a num wa ber of issues related to ns because th additional 28 percen eir busin drop benefits because of the cost. ber of cas ong e ployees, com ess cannot afford to offer them m t would som sm ployers with 25 to 50 workers. About 65 es where em all em pployers and their decision to offer ared to 13 percent of com ewhat favor such a proposal. ployers offering health , up from 69 panies nonelderly population. of providing health benefits. Nearly 20 percent of the employers in the sample made 70% 66% for Employ 65 e% e-Only Coverage, 2002 Highlights: 70% 70% Don't Know Tax credits to employers 2 1 70% 62% It increases productivity by keeping employees healthy. 37 28 33 36 63% that do offer health benefits (Figure 11). benefits were m health b Just 7 percent would som percent of employers with two to nine worker percent in 2000 (Figure 17). In Affordability for the employer and the wo enefits to work ore knowledgeable than em ers. ewhat or strongly The goal of the survey was to addition, 68 percent report th pl oppose it. Companies that currently offer oyers not offering health benefits about the s report that health be rker is a clearly a c gather inform at revenue is too uncertain nefits have had an ritical factor ation to better T - 137 changes to their health plan between 2001 a Employers offer health benefits to w . “Sources of Coverage and Characteristi nd 2002. Of those that m orkers for a num cs of the Uninsured: Analysis of ber of reasons. Health ade changes, they 40 • % A number of factors would increase the likelihood that a small business would seriously Company started less than 10 years ago to reduce health 69% Tax cr 49% edits to worke 31% rs to 60% 60% Employees demand or expect it. 38 34 31 28 Source: EBRI/CHEC/BCBSA 2000 & 2002 Small Employer Health Benefits Survey. 60% 53% 60% insurance costs of 35 lo % w- reduce their cost for understand how to get more sm tax treatm health benefits are slightly m to comm affecting the future changes to health be In addition to differences in incom it to offering a health benefits ent of health benefits as it applie ore likely than all employers to plan, up from nefit program e s to , co those that do not to str th m offer health benefits. Since the vast em panies not offering health benefits are selves or their workers, a surprisin 56 percent in 2000, and 61 percent s. Overall, 23 percent of ongly favor tax breaks. gly were m the March 2002 Current Population Survey.” benef impact on retention, compared to 84 percent am its pro o consider offering a health benefits plan. N re likely to ask employees to pay m vide worker Not offering h s and the ealth plan has impact on: ir families with ore EBRI Issue Brief for needed health ca ong em protec early three-qu tion f ployers with 25 rom no. 252 (Em arters w financia re serv -ould seriously consider 50 wor l losse ices than to ployee k s tha ers.t can • It reduces absent Overall, 19 percent of sm eeism by keeping emplo all e yees hea mployers offeri lthy. ng health benefits m 31 24 ade changes to their 37 34 50% 35% wage workers health insurance 49% 50% 50% Employee recruitment 42% 44% 26% more likely than em m Am high percentage of em report that their com m accom Benefit Research Institu respondents from a ajority of large em ke any other change. If the cost of ong e pIn contrast to the value perceived by re any mployers not offering health benefits, 30 unexpected serious illness or in com ployers offering health bene ployers offer health benefits, but m pany does not h pl pate, Decem oyers offering health nies offering health ber 2002b). ave a plan b provijury. ding health benefits were reduced, m benefits think their firm benefits still did spondents from fits to have a sm ecause em Health benefits can also be used to percent said they any s ployees have coverage m firms w not understand how those all e aller proportion of full- m would be m would change ployers do not, ith health benefits, u och re s more mall 50% offering health benefits if the government provided assistance with premiums. More than Competitors offer it 31% 35 29 30 28 health plan between 2001 and 2002. Sixty-fi Figure 17 ve percent increased deductibles and co- 40% 35% Employee retention 40 37 26 40% tim understanding the health coverage decisions benefits are treated by the tax likely to offer them elsewhere, which is unchanged from 2000. Near coverage and 3 percent think it 30 e e % Tax d mployees. More than one-half of e eductible for the emplo if the governm yer. code. It is im would drop coverage if the co ent provide mpl portant for of sm oyers not offering health benefits, and 30 d tax breaks to reduce health benefit costs ly 50 percent reported all-business owne 23 employers to understand the tax st of health insurance in 18 rs is of critical that they did not 38 42 em prom most of those from ployers would offer them ote health, to increase wo Much mo com re likely panies that do not offe . In contrast, rker productivity, and as a form if the cost of provi r workers health coverage tend to think that 30% ding health benefits of comp 26% ensation to recruit 40 percent would consider doing so if insurance 30% costs fell 10 percent. In addition, nearly 40% 29% 31% 40% Reasons for Not Offering a Health Plan pays; 35 percent switched insurers; 30 percent increased the employee share of the Employee attitude and performance 43 29 19 26% 32% 30% Not included in taxable income fo Somewhat more likely r employees. 47 11 15 49 35 32 25% percent of employers offering h for low-wage workers, while another 47 percen trea im offer health benefits because they did not need general were to increase by an additional 5 portance in efforts to expand health insuranc 30% tment of health benefits for a num ealth benef ber of reasons. Probably the m its ind percent (Figure 4). it to recruit and retain workers, up from 35 e coverage in the current h t would be som icate that fewer than 80 percent of their eIf costs in what mo ost important reason re likely to of creas ealth insurance ed 10 fer and retain qualified workers. W continue Fronstin, Paul, and Ruth Helm not having health benefits has no im s to increase, some employers will d an. “Sm hen asked to rank the im pact on th all Emrpl op ese factors. Between oyers and Health Benefits: Findings from health be portance of all employee nefits. Spec 68 and 80 percent of ifically, if the cost half would be more likely to seriously cons ider offering a health benefits plan if 25% Health of employees 31 28 21 30% premium; and 29 percent cut back on the scope of benefits. Twenty-six percent increased 24% 30% No more likely 22 24 One or more employees have medical problems. 11 11 23 19 20% Major Reason Minor Reason em system is the fact th benefits (F percent in 2000. percent, 42 percent thin ployees work full tim and reduce the growing num igure 22). at mispercep k their firm e tions about how health bene (Figure 12). Firm would change covera ber of uninsured Am s that do not of fits are taxed m ge and 7 percent think it would ericans. fer health benefits also tend to ay prevent of health insurance increases an additional 5 benef the 2000 Small Em employers not offering health benefits report its, health benef ployer Health Benefits Survey.” its are by far the benefit m percent, 23 percent of that not offering them ost valu EBRI Issue Brief ed by workers and has had no im em no. 226 (Em ployers said that their fap pact on m loyee ilies. 20% employees demanded it. Don’t know/Absenteeism Refused 1 26 23 18 2 the scope of benefits offered. Source: EBRI/CHEC/BCBSA 2000 & 2002 Small Employer Health Benefits Survey. 16% 20% 10% 7% 20% 15% 14% 9% 2000 2002 2000 2002 10 20 % % 13% have larger proportions of em drop coverage. If costs increased 15 percen ployers from Small em offering health benefits. ployers not offering health benefits females, workers under age 30, and m t, 54 percen would also be m t think thei inority employees. r firm ore likely to offer would change Sixty percen Benefit Research In they would change their plans and 3 percen employee recruitm t of workers responding to a recen ent, employee retention, em stitute, October 2000). Overall Success of the business t repo pl t su oyee attitud rt th rvey rated employm at th 41 ey e would drop coverage. and perform 33 ent-based health ance, the health 20 6% 10% 10% Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Survey. 9% 2% The business cannot afford it. 53% 63% 16% 16% 10% 0% 10% Source: EBRI/CHEC/BCBSA 20 Committee on Small Business 02 Small Employer Health Benefits Survey. benefits as the m them Health Benefit Cos Potentia of their em coverage, w if tax credits f l Benefit Spons ployees, absenteeism hile 15 percent th ost i o tr he s mport o alth insuran rs ant benefit (Chr ink it would drop coverage. , or the ove ce were istensen, 2002). rall su available to workers. Just over one-quarter ccess of their business (Figure 7). 3% 1 5% 2% • 0% Over 40 percent of the employers in our sam Figure 6 ple reported that the cost of health benefits Revenue is too u Switched insurer n scertain to comm Increased employ it to a plan. ee share Increase deductibles and Cut scope 40 of benefits 45 Add scope of benefi 16 ts O 23 ther 11% 11% Firm Size and Revenue would be much m Conclusion Like em One-third of Of the em ployers nationally, the em ployers reporting that they w ore likely to offer health firms that do not currentl United States Senate ploye benefits and another 49 percent would be y offer health benefits are potential ould drop coverage at rs in the SEHBS sa mp various levels of le have been Methodology Most workers with access to em While em . “Sm ployers not offering health benef all Employers and Health Bene ployment-based health benefits take up coverage its generally do not perceive that the fits: Findings from the 2002 Small 0% 0% of the premium copays Impact of Offering a Plan, by Size of Business, 2002 High turnover High turnover with a stable Moderate turnover Little Turnover Employees have coverage elsewhere. 43 40 18 21 affected some aspect of their business other than the actual health benefits. Some 1 0% 8% Figure 20 experiencing double-digit cost increases. som purchasers of health benefits for their em prem eium what more likely to of The sm While em increases, 27 p aller a f 2-9 E ploym mi plrm e oyees e nt-based health benefits are by far the m rcen , the less like fer them t were either extr if workers had such assistance (Figure 22). ly it is ployees. Eleven percent of em In 2002, the cost of em 10-24 E to em offer health coverage. Of the e ely likely or very li mployees o ployee-only coverage st common for kely to provide cash ployers not 25-50 E m mm ployers ployees of Em from lack of health benefits has an im ployer Health Benefits Survey.” that employer. In 2001, 82 percent of The Sm 40 perc all Employer Health Benefits Su ent or more pact on 20-39 perc EBRI Issue Brief co em re ploye ent workers whose em rvey (SEHBS) was designed to exam e retention, those without coverage are no. 253 (Em 1-19 perc ployer offered them ent ployee Benefit None health ine Employees cannot afford it. 37 43 17 18 employers reported that they reduced or eliminated pay raises or bonuses, reduced other 3 Factors Likely to Make Companies S Figur ee 23 riously Consider Offering Plan, 2000 & 2002 Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Survey. that do not offer health benefits, 85 percent averaged $3,392 annually for the employers in our sam health insur currently offering health benefits are either assistance to em Sa ourc nce cove 3%e:ployees to help them EBRI/C ra HE ge in the Un C/BCBSA 2002 S ited St buy mall E health insurance on their own. Nearly 40 ates, m mextrem em ployer Heal ployed fewer than 10 workers (Figure 13). aely or very likely to start offering a ny workers are not offered health th Bp enef le, up from itsTotal $3,008 in 2001. 2-9 Workers 10-24 Worke rs 25-50 Workers Research In the reasons Am benefits were covered by that plan (F more likely than those with coverage to repor 5% Large poS rtion of stitu ource erica’s sm te, J :w EoB rkers are seas Ra I/nu CHE ary 2003). Call e /BCB onal, part-time, o m SAployers (with 2002 S rons mall E tin, 2002a). Of the re r high mplt that m oyer Heal two to 50 workers) offer or do not offer to h B st of their em enef34 31 15 18 its maining 18 percent not ployees stay only a employee benefits, or put off equipment and other purchases. Some employers also Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Survey. Small Employer Knowledge of the Tax Treatment of Health Benefits, 2002 turnover. S Hearing on Major Minor Major Minor Major Minor Major Minor In contrast, of the em Employer K This represents an increase of 13.1 percen benef health benefit plan for employees in the next percen its or d t were som n oowledge of the Tax Treatment of Health Benefits not par ewhat likely to pro ployers surveyed that ticipate in the pv lan when it is of ide cash t between 2001 and 2002 and is consistent w do offer health benefits two years (F assistan fe ce, and red. As a resu igure 18). 31 percen , 66 percent em This is statistica lt, of t were not likely. the 41 m ployed illion lly ith health benefits to their w participa few months. Specifically, 6 percent of e ting in their employers orkers and related ’ benefits plan, 61 percent were mploye issues. The survey was conducted within the rs not offering health benefits reported covered by another health Much More Likely Somewhat More Likely No More Likely reported that they either were not able to hire needed workers or they laid off some 0% 4 Impact Impact Impact Impact Impact Impact Impact Impact Employees prefer wages and/or other benefits 30 28 20 21 fewer than 10 workers. In addition, employers Gabel, Jon, et al. “Job-B unchanged from other surveys of s United States between July 25 and Sept. Am plan. In other words, of workers offered While em high turnover of workers, com ericans who do not have health insurance co Currently, health insurance prem ployers report that they will drop c A 2000. An addition nsm wered Ques all employers. ased Health Be tion Correc pared to ta lyl 22 percen 2 percent am nefits In 2002: Som ium 5, 2002, through 18-m health benefits by their em Anss overage if costs increase, they m w paid ered Ques not offering health benefits are m t verage, 86 percent are in a fa are som by employers on behalf of workers are ong e tion Ie n m what likely to start a health co e ployers offering health rrec Im tilportant Trends” nute telephone interviews y ployer, 82 percent Did Not Know m ay not be ily with a A Health o nre than swer t o Question Less than $1 ,000 $1 ,000 - $1 ,999 $2,000 - $Figure 14 Figure 12 2,992000 9 $3,0002002 - $3,999 $2000 2002 2000 2002 4,000 - $4,999 $5,000 or higher EmploCompan yee workers. recruitment y does not need to offer a plan to recruit and retain good 18 19 17 29 34% 37% 27% 36% 45% 42% 54% 31% twice as likely to have annual gross revenues benefits plan, up from tax-deductible for em worker, and sm able to easily drop coverage if cost increases While these averages help to explain im all firm ployers as a business expe 17 pe s employ 62 percent of uni rcent in 2000. However 66 percen Small Business and Health Insura are coupled with a tight labor m of less than $500,000. Si portant trends, on the surface, they nsnsured workers. Since the vast m e. They are treated th t of em nce ployers not offering xty-five percent of e sama erket. For way other m ajority ask with 502 companies with health benefits a were covered by that plan, 14 percent had cove benefits (Figure 8). Furtherm ore, 53 percen nd 498 com t of employers not offe rage elsewhere, while 4 percent rem panies without health benefits. ring health benefits ained Affairs. Vol. 21, no. 5 (Septem Annual Gros ber/October 2002): 143 s Revenue of Emplo Figure 9 - y151. ers in Sample, 2002 workers Employee retention Workforce Characteristic35% 37% 31% 34% 42% 43% s, 2002 43% 41% Question Asked of Employer Sour ce: EBRI/ CHEC/ BCBSA 2002 Small Employer Healt h Benef it s Sur vey. If it could be demonstrated that absenteeism would 5% 7% 15% 24% 79% 68% em other im health b labor costs and general business expenses ar of large em exam ployers that do not of ple, when costs increased 17 percen e portant changes that are taking pl nef ployers offer health benefits its said th ey are not like fer health benefits ly to , but m offer them t between 1998 and 2000 for s ace. F had annual gross revenue of less than e treated under the tax a ny sm o r exam in the next two years. all e ple, while 35 percent of mployers do not, sm Emplo code. For exam yer Dm oes Not all em all- ployers, ple, W uninsured. reported that they experienced little ithin each group, quotas were estab turnover, compared lished to ensure sufficien with 62 percent am t representation for ong Emplo Owyee neattitud r has cover e and perf age elsewhere ormance 40 24% 45% 22% 43% 32% 49% 29 13 14 23% 54% 42% 43% 14% Total decrease • Nearly one-quarter of sm Impact of Not Offering He all employers offeri alth Benefitsng health benefits th , by Employee Turnov ink their firm er, 2002 would Employer Offers Offer Health Health insurance premiums are Health Setting up a plan of employees is too complicated and time consuming. 11 28% 38% 28% 35% 27% 43% 8 20 19 30% 47% $500,000, com the cost of health benefits are tax-deduc em business ow the percentage of them ployers paid between $3,000 and $4,000 fo Comners are seen as perhaps the m panies likely to sta pared with 33 percent am offering health benefits rt a health ben tible just like wages and salaries are tax ong e oste crucial opportunity in efforts to expand m r employee-only coverage in 2002, the f in its plan differ from ploye creas rs that did offer health benefits ed 24 percen others not currently t (Levitt, et al., 2001). analysis by num employers offering health benefits. It is The likeliho ber of employees. The resul od that a worker has h possible that som ealth ting sam benefits from ple wa e decision m s weighted by presence of his or her em akers m ployer varies ay be Levitt, Larry, et al. Employer Health Benefits: 2001 Annual Survey Emplo. Menlo Park, CA and yer Does Not Figure 4 High or Little Turnover 45% 41% 13% If it could be demonstrated that it Offers Benefits Percentage of W would improve orkforce 12% Health Benefits 10% Benefits 24% 30% 63% 59% change coverage and 3 percent think it would drop coverage if the co 100% st we tax-deducti re to incre ble to the ema pls oyer e Absenteeism Employees are healthy and do not need it. 10 9% 45% 8% 43% 5 17 13% 20 48% 7% 56% Employer Offers Offer Health Moderate (Figure 14). W deductible as a business expense. offering a plan in a number of ways. Those likel prem recruitment and health insurance coverage in the current he While som ium wa e em rs less than $1,000 for 3 percen etention h ployers m ile 29 percent ay have dropped health of companies with health benefits report gross revenues of alth insurance sy t of employers, between $1,000 and $2,000 for y to start a health benefits plan are more benefits in response to the cost increase, stem and reduce the growing substantially by firm plan and number of e unaware of or underestim size. W mployees to ref ating the effect th orkers in the sm lect the national population of at their firm allest firm’s lack of coverage has on s tend to be the lea small em st lik ployers with ely to (true) Chicago, IL: Henry J. Kaiser Fam Potential Small Emplo ily Founda yer Reaction to tion and Health Research and Educational Increas e in Health Insur ance Costs 37% 47% 15% Does Not Offer Benefits Annual Gross Revenue Health Benefits Benefits Overall success an additional 5 percent. of Business 20% 46% 19% 42% 21% 53% Turnover 20% 57% Do not know where to go for information on starting a plan. 8 4 21 18 Testimony Submitted by $1,000,000 or m apt to have been in business for less than 10 If 11 percent, between $4,000 and $5,000 for 8 per two to 50 workers. have health benefits from their own em num even m turnover. H yourb emplo er of uninsured A o The am re added health benefits, m yeeo s asked for it wever, respondents without heal ount that em ore, 18 percent of em Full-time mericans. In orde ployers pay on behalf any for the first tim ployers not offering health ployer. In 2001, 28 percent of workers em r to better understand how years. Nearly 70 percent of em th benefits who describe their em 13% cent, and $5,000 or higher for 11 percent of workers is excluded, without lim e, possibly because they were 14% benefits report this level to get m 37% ployers not ore s 31% ployee m ployed all it, 47% 54% Trust, 2001. Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Survey. Major Minor Major Minor Source: EBRI/CHEC/BCBSA 2000 & 2002 Small Employer Health Benefits Survey. If insurance costs fell 10 percent 100% 52% 13% 10% 30% 34% 54% 40% 55% of revenue. offering health benefits, but who are extrem from (Figure 1). em com ployers to offer health benefits, the SEHBS c p workers' eting for qualified workers dur taxable income. However, if ing a tim ely a wo e of low unem or very likely to offer them in the next onducted a survey of small em rker were to purchase h ployment. ealth insuran ployers ce in firm turnover as high or m s with fewer than 10 em In theory, the weighted sam Less than $500,0 oderate are m ploye 00 o pre likely th es were covered by their em le of 1,000 yi an those with little tu elds a s 33% tatistical p ployer’s health benefits r65% rnover to report that ecision of plus or Employees who purchase health 63% 22% Impact 14% Impact Impact Impact Total Figure 2 • Most small employers offer sound business reasons for offering health benefits to If there were an increase in the bu80%-9 siness’ 9% 18% profits 22% 24% 35% 39% 41% 7% 36% 1 insurance on their own generally can Employee recruitment $500,000-$999,999 26% 12% 17% 29% 4% 19% directly from an insurer, generally none two years, report that they have been in bus with between two and 50 em EBRI estim Som While 13.1 percent was the average annual ate e of the differences in revenues betw s from the 2001 Med ployees. ical Expen of the prem dituriness for less than 10 years (Figure 19). In e Pane een companies with and without benefits l Su increase in prem ium rvey can be deducted from (MEPS). See iums, 6 percent of the m (Fronstin, 2002b). More than 40 percent of workers em not offering health insurance has an im inus three percentage points (with 95 percent pact on recruitm certainty) of what th ent, retention, perf ployed in a firm e results would be if with 10 to 24 ormance, health 60% 23% 17% Offers Benefits deduct 100% of their health Distribution of Percentage Change in Premium Between 2001 & 2002 If the government provided assist50%-7 ance w9% 22% ith health 28% 30% 36% 41% 31% 30% 28% Continue to Offer workers. Many report that it helps with employee recruitment and retention, and Employee retention $1,000,000-$1,999,999 17% 10 5% 35 2 15 www.meps.ahcpr.gov/Puf/PufDetail.asp?ID=87 (last reviewed October 2002) for more inform in ation re surance prem gairdi umsn (fal g the se) Paul Fronstin Figure 7 result from workers' contrast, only 31 percent of those not likely to em Impact of Offe ployers reported a decrease in their prem This testim taxable incom the fact that firm ring Be ony presents a num e nefits . For individuals s with benefits ber of who do not receive employm tend to have m ium imoffer health benefits portant findings from (though never larger ore workers than those without have been in business the 2000 and 2002 than 1 percent), 25 ent-based health all nongovernm em status, absenteeism ployees had coverage from ent businesses with two to 50 , and the overall su their employer, ccess of their business (F workers were surveyed with com and 56 percent of workers in firm igure 9). ps with 25 lete insurance premiums 69% Figure 18 21% 10% Does Not Offer Benefits Less than 50% 8% 22% If cost increased: Current Coverage Change Coverage Drop Coverage Don't Know Employee attitud $2,000,000 e and perfo -rman$4,999,999 9% ce 5 2% 25 1 18 increases productivity. More than three-quarters report that offering health benefits is 2001 MEPS. Impact of Offering or Not Offering Health Benefits to Employees, 2002 Employee Benefit Research Institute 28% benefits. However, companies with health benefits, total health care expenses (inc less than 10 years. percen SEHBS as t 30% t repo Employers offer health benefits for a nu h rted no ch ey relate to sm an Lik ge in their prem eall e lihood of E mployers and m luding prem ium ploy coverage generally have higher gross ,e and 18 per their decisions to offer health benefits to r Offe mber of reasons. In general, m ium ring He s) are deductible only if they cen at r lth Be eported that their prem nefits in ost ium accuracy. There are oth to 99 em Just as the larger em ployees had coverage from er sources of error on ployers am their em ong those surveyed are m ploye all surveys, ho r. In contrast, 68 pe wever, tha ore likely than sm rc t m ena t of workers in y be more aller $5,000,000 or more 3% 1% Source: EBRI/C Health of emplo HEC/BCBSA 20 yees 00 & 2002 Small Employer Health Benefits Survey. 3 28 2 15 “the right thing to do.” Female revenues than those without benefits even exceed 7.5 p em increased less than 10 percent (Figure 2). Fu workers. First, m ployers offer sound business reasons for offer Employers who are extrem erceno t of adjusted gross incom st small employers o ely or very likely Next T ffer sound business reasons for offering health w when com o e Y , and only the am rtherm ears, 2000 & 2002 i ng health benefits to w ore, 28 percent of to s paring co tart offering a health plan ount that ex mpanies with sim employers reported oceeds 7.5 rkers. Among ilar are also serious than theore 2 firm employers to experience an im s with 1,000 or m tical c orea em lculation ployees were c pact from s of sam offering benefits, larger em p overed by their employer' ling error. These include refusals to be ployers that do not s health benefits. Employees do not pay tax on the Absenteeism Don't know/Refu 25% sed 62% 11% 25% 3 23 9% 13% 2 12 5 percent Total 70% 23% 3% 4% See Fronstin and Helman (2000) for a summary of findings from the 2000 SEHBS. 25% Employee 100% 6% 23%17% share of their premiums that are paid (Among companies not offering a health plan) num percent of adjusted gross incom more like that prem the sm benefits to workers. When asked specifica bers of em all employers responding to the survey, ium ly than those no s had increased by at least 20 percent. ployees. t likely to start of e is deductible. f lly w ering a health plan to 45 percent reported th h ether offering health benefits has an report that not offering at a major reason for interviewed and other form offer health benefits are more likely than sm The likelihood that a wo Source: EBRI/C s of nonresponse, th rker has cov HEC/BCBSA 20e 02 Small Employer Health Benefit aller ones to report an im rage from e effects of question his or her own em wording and question s Surve pact due to their ployer is a y. Overall success of Business 70% 20% 8 10% 26 3 15 10 perce Offers B 100% enefi nt ts 46% Figure 21 42% 7% 4% 34% 37% 28% by their employer (true) recruitment 80%-99% 8% 9% • Most small employers that do offer health benefits report that it has a positive impact on 3 Does Not Offer Benefits 8% 24% 68% Washington, DC health benefits has had an im of im These fpact on their business, m ering it is fiUntil 2003, the health ins Overall, 19 percent of the em gu Source: EBRI/C res that it he are basedHEC/BCBSA 20 o lps n th with em e sam ost sm pact on em ple02 Small Employer Health Benefit u of ployee re all em rance p 33 ployers that 9 em ploye ployee recruitm rpl emium cruitment, while 30 percent said em oyers rs with benefits agree that it does. of s offered health benefits m feri of the self-em ng heal ent, retention, perf s Surve th bey nefi . ployed were treated ts in b otha orm 20 de changes to 01 a ployee a nce, the nd 2 000 and who order, and screening. While attempts are m function of whether the em lack of em 15 perce plnt oyee health coverage. More th Support for Tax Br ployer offers that 25% eaks to Redu an 50 percent of em a employee health benefits, and whether the de to m ce Health Insuran 54% inimize these factors, it is difficult or ployers with 25 to 50 ce Co 15% sts 5% 90% 48% 33% 19% Does Not Offer Benefits 18% 20% 50%-79% 25% 26% Employee various aspects of the business, such as recruitment, retention, employee attitude and also were able to report the cost of health benefits for employee-only coverage for both years. for Low-Wage Work ers, 2000 & 2002 Firm Tenure differently from health status of their em their health plan between 2001 and 2002. Give Em recruitm ployers not offering health benefits generally 25 perce ent was a m nt those for wage and salary wo inorployees, absenteeis reason (F 35% 12% igure 5). m Many em , and the overall success of the business. rkers. Seventy percen n recen do not perceive that the lack of health 37% 59% ployers already reported that t stories about prem t of 22% 27% health insuran ium increases, 6% ce im em workers report that not offering health be possible to quantify the errors ployee takes it when offered. Overall, work Offers B 80% enefits that may result f nefits has had a major or m ers in sm rom them all f . irms are less likely to be inor impact on Less than 50% 60% 47% retention Figure 15 performance, em 6% ployee health status, and the 24% overall success of the bus 70% iness. Most small Figure 10 15% 2000 2002 Com prem this is a surprisingly sm benefits has an im offering health benefits helps increase loya p ium anies that do not of s paid for partners in a business, 70% pact on their business, but th all percentage, but it fer workers health c Subchapter S owners, and self-em lty and reduces turnover. Fifty-two percent is a overage have generally been in business for ere is ev lso relaidence that it does ted to whether or not an em . This analy ployed ployer sis offered health benefits. In 2001, 44 percent of employee recruitm The SEHBS was co-sponsored by the Blue Cross and Blue Shield Association Source: EBRI ent (Figure 10). In addition, /CHEC/BCBSA 2002 Small Employer Health Beworkers in establishm nefi 49 percent report that not offering health ts Survey. ents with fewer than 4 Age of Business of Employers in Sample, 2002 Employee attitude The Kaiser Family Foundation Impact of /Health Research and Not Offering He Educat alth Be ional T nefi rust survey found t ts, by Size of Busine hat premss iums increased 5 employers that do not offer health benefits tend to th Employer Offers Health ink that not offering them Employer Does Not Off has no er Under Age 24%30 45% 30% Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Survey. less tim individuals was deductible from m finds that employers not offering health benef reported that as a m ade a benefit change in order e than have those that offer coverage 60% ajor reason, while 26 to avo such i id la ndividuals’ gross incom percent reported it as a m rge pre Feb. 5, 2003 . In particular, com its are m mium increa ore likely than thos ses. e in 2002. These panies without plans are Of the em inor reason. e offering th ployers that em (BCBSA), a Factors That Would Encourage Sponsorship 10 em benefits has had an im ployees were offered coverage, com federation of independent, locally pact on employee rete pared with 86 percent am ntion, and 43 percent re operated Blue Cross and Blue Shield ong workers in port that not offering and performance between 14.2 percent and 14.9 percent for employ Total ers with three to 49 em Benefits ployees. The survey also found Health Benefits that the Does Not Offer Benefits 3% 21% 75% 49% 10% negative impact on the above aspects of thei 40% or more r business or the over 19% 26% all success of the 1 44% 50% more likely than those with plans to have b individu did m to report that m Increasing productivity was a ake changes to their benefits plan Em als will be ab ployers not offering health benefits were ost of their em le to deduct 10 nother reason why m ployees are 0 percen between 2001 and 2002, em high-turnover and stay with the business for een in business for less than five years (13 t of the cos a read a list of factors that m ny em t of ployers offered health benefits, their health insurance ployers were m ight m ore ake establishm health b enef ents with 100 or m its has had an im pact on em ore employees. ployee attitud When offered coverage, w e and p Total erformance. In contr 2–9 Workers orkers in small 10–24 Workers ast, 25–50 Workers Plans that collectively provide health care coverage to 75 million?more than one in annual premium for employee-only coverag2000 e was $3,42002 2000 2002 19 for employers with three to 9 em2000 ployees, $32002 ,233 for Health of 6% 20%-39% 25% 24% Offers Benefits 28% 38% 32% business. However, those not offering benefits are more likely than those offering them 40% percent vs. 19 percent), and less likely to have beginning in the year 2003. their business m likely to ask em only a few months. with 28 percent report ployees to pay m ore likely to seriously consid ing it as a m ore when they needed health care services than to m ajor reason, and 36 er offering a health benefits plan. Not been in business for percent reporting it as a m 30 years or longer (20 inor ake employees em estab between 19 and 29 percent of em ploy lishm ers wients are alm th 10-24 empl o oy st as likely as worker ees, and $ployers with 2,867 for em Employer Offers Health pl s in large establishm oy two to nine workers perceive that not ers with 25-49 em Employer Do ployees. ents to take coverage. Se es e Ga Not bel et al. (2002) for 3% 21% 76% four 5% ?Americans; the E1%-19 mployee Benefit Research% 18% Institute (EBRI), a private, nonprofit, 7% Major Minor Major Minor Major Minor Major Minor to report that most of their employees are high-turnover and stay on the job only a few Strongly favor Age of Business 56% 58% 59% 62% Benefits Offer Health Bene53% fits 30% more information about the survey. 22% 21% 22% 50% percent vs. 12 percent) (Figure 15). surprisingly, respondents are m any other change. Sixty-five reason. Interestingly, 77 per Many sm Second, one-third of employers all employers are m cent of employers re percent of e ost inclined aking decisions about whether or not to offer health not currently offering health mployers reporte to say that factors having to do with ported that a m d increasing deductibles and ajor reason for offering benefits indicate they In 2001, 81 percent of workers in establishm offering health benefits has had an impact on None 38% en recruitm ts with fewer than 10 em 17% ent, retention, perf42% pl orm oyees took the ance, health nonpartisan public policy research organization; and the Consum Impact Impact er Health Education Impact Impact Impact Impact Impact Impact 9% 45% 44% Somewhat favor 30 28 30 24 29 Absenteeism months. 34 20% 0% 2% 17% 80% D oes Not Offer Benefits co-pays, while 35 percent switched to a diffe insurance coverage to their wo incre are likely to of health benefits was because “it was the ri asing the af fef r it in th ordability of e next two y hea rkers without being fully aware lth insuranc ears. ght thing to do.” An If em rent insurer (Figure 3). About 30 percent e cployers were given overage would m additional 15 percent of the tax advantages that ake them financial incentive more likely to s to coverage when offered, com status of workers, and absenteeism pared with 89 pe . rcent among workers in establishm ents with Council (C HEC), a health education organization that was formed to help the American 5 Somewhat oppose 4 7% 3 3 3 5 Less than 5 7% years 13% 19% 5% 3 Plans with redu Negat ctio ive ns, no chan 4% ge, No o C r low in hange creases in 0. p01% rem -ium 9.9% s might be e10% xpect - 19. ed 9% to have been 20% m or ore l higher ikely to Minority Employee recruitment 10% 8% 24% 7% 22% 9% 32% 16% 35% can m each increas consider offering a health benefits plan. Fo offer health benefits, health reported it as a m ake this benefit m ed the share of the prem inor reason. ore affordable. For example, 57 percent of all sm insurance coverage could be ium that em r example, if the governm ployees were required to m expanded, although whether the ent were to provide all em ake to ployers Likelihood of Offering Benefits 100 or m ore employees. Strongly Offers Bopp enefiose ts 20% 3 46%4 2 2 34%3 public better understand, acquire, and utilize health insurance. Mathew Greenwald & Overall success 5-9 years 19 20 6 make changes to keep premium increases from occurring. However, no variation was found in the likelihood 100% 4% 8% Employee retention 6 24 5 22 8 37 19 30 • SoSm urce: EBRI all em /CHEC/ 0% BCBSA ployers tha 5% 2002 Small Empl 20% oyter H of ealf the Br hea enefits Survlth be ey. nefits tend to be distinctly different from 74% those not The views expressed in this statement are solely those of the author and should not be attributed to the Employee of business surveyed in the 2002 SEHBS did not know th participate in the plan and cu assis expansion w tance wDepend Som When specifically asked whether offering he s e ith prem ould be significant employers not currently offering health benefits have of iums, 71 percen t back on the scope of benefits is the subject of debate. t said th4 ey at health insurance prem 3 3 3 would be m alth benefits has an im offered. Also, 26 percent of uch more likely or som fered them iumspact on their are 100 6 in the ewhat Employer P While m rofiles ost workers par 10-14 years ticipate in their employer15 17 's health plan when it is offered 3 Associates, Inc. conducted the survey. making a plan change by the change in the premium. These findings may be due to small sample sizes. Employee attitude and performan50%-9 ce 9% 10% 3 21 12% 2 21 5 25 5 38 Extremely likely Very likely Somewhat likely Not too likely Not at all likely Ben efit Research Institute, its officers, trustees, sponsors, or other staff. The Employee Benefit Research Institute is offering them. Worker income in firms not offering health benefits tends to be Don’t know 3 4 3 4 3 15-29 years 32 29 4 past. Overall, 21 percent of com percen the em more likely to seriously consider offering he business, m t tax deductib ployers in th This SEHBS also iden ost small employers with benefits e sam le for th ple inc e em tified num reas p ployer (Figure 23). anies that ed the scope of benefits offered. erous ch do not currently offer health benefits report alth benefits (F agree that it do allenges to expandi igure 20). Also, 63 percent es. More than 70 percent ng health benefits to them Sm , ma all em ny workers are clearly n ployers that offer health benef ot offered hits to wor ealth benefits or do not participate in the kers tend to be distinctly 20%-49% 13% 11% Major Impact Minor Impact No Impact a nonprofit, nonpartisan, public policy research organization. 30Years or more 20 12 considerably lower than in firms that do offer them. Employers not offering health Source: EBRI/CHEC/BCBSA 2000 & 2002 Small Employer Health Benefits Survey. 1%-19% 20% 7% their business has offered som would consider offering health benefits if ther Health of emplo am say that offering this benefit has a m ong s While only 19 percent of e W mith respect to an em al yl em ees ployers. Small em ployer' e type of health m pl ployers that o s knowledge aoyers that o jor or mie w nor im ben about the tax trea ffer health benefits tend to be distinctly e ffered health benefits m ere an increa fits plan in the pa pact on employee recruitm 3 se in 21 tment of health the business’s profits, st five years, up from 2 ade changes to 21 ent and 5 23 11 22 plan when it is of different from smfall employers not offering h ered. Of the 41 million Amealth benefits. This m ericans who do not have hea ay partially explain lth insurance Source: EBRI/CHEC/BCBSA 2000 & 2002 Small Employer Health Benefits Survey. Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Survey. benefits are more likely than those offering th None 50% em to have a sm60% aller proportion of full-time Absenteeism 2 17 2 17 3 21 3 22 benefits as it affects their workers, many 12 percent in 2000 (Figure 16). Just over 40 pe their health plan between 2001 and 2002, the and 44 percent report that they would consider different from s retention, with roughly one-third mall employers not offering th reporting that it has a m continued to m employers surveyed in the SEHBS al em. W doing so if insurance costs fell 10 percent. rcent reported that th orker incom aa ke false assum jor impact (Figure 7). Nearly e in firm e cost of coverage ptions. More s not offer so ing coverage, 86 percent are in a fam why some companies find that offering or not ily with a worker and 62 percent of uninsured workers offering health benefits has an impact on Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Survey. Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Survey. employees, and employers that do not offer health benefits have a larger proportion of Overall success of Business 5 20 5 19 5 26 16 32 than one-third are not aware that employees was the m reported that the cost of health benefits has Forty five percent said they would be m 70 percen health benefits tends to be considerably lower than in firm t indicate it h ain reason for dropping health benef as either a major o or m re affected their business in other ways. Some likely to seriously consider offering a health who purchase health insurance on their own inor im its, while another 18 percent reported that pact on employee attitude and s that do offer them. are em employee recruitm ployed by firm ent, retention, and perform s with fewer than 100 em an ployees (Fronstin, 2002b). Since workers ce, while others do not. It may also help Source: EBRI/CHEC/BCBSA 2002 Small Employer Health Benefits Surve y. females, workers under age 30, and minority employees. Even among firms with three to 16 12 17 10 18 13 14 20 21 15 22 19 11 8 2 9 4 5 6 1 3 7