Few Small Firms Responding to Rising Health Premiums By Shifting Costs to Workers or Cutting Benefits Affordability Continuing Concern

January 24, 2003
Jim Jaffe
(202) 775-6353
jaffe@ebri.org, EBRI
Paul Fronstin
(202) 775-6352
fronstin@ebri.org, EBRI

WASHINGTON, DC—Nearly 1 in 5 small employers (19 percent) offering health insurance modified these benefits during 2002, according to a new survey by the Employee Benefit Research Institute (EBRI), which found that the changes often led to higher employee costs.

Of those that made a change, nearly two-thirds (65 percent) increased workers' co-payments or deductibles, 30 percent raised the percentage of premiums the employee pays, and 29 percent cut back on the package of benefits offered. More than a third (35 percent) switched insurers.

But more than a quarter of the group (26 percent) increased the scope of their health benefits. However, employers also reported that the cost of health benefits has affected their business in other ways. Some employers reported that they reduced or eliminated pay raises or bonuses, reduced other employee benefits, or delayed investments

Affordability for the employer and the worker is clearly a critical factor affecting the future changes to health benefit programs. Nearly a quarter of small employers think they'd change coverage if premiums rose by 5 percent or more. Three percent said this size increase could cause them to drop health benefits entirely.

The 2002 Small Employer Health Benefits Survey (SEHBS) is cosponsored by EBRI, the BlueCross BlueShield Association, and the Consumer Health Education Council. Details are published in the January EBRI Issue Brief, available online at EBRI's Web site at www.ebri.org

Most large employers offer health insurance to their workers, but large numbers of small employers do not—and most Americans work for small firms. The SEHBS also examined major causes of the uninsured problem among small businesses. Among the survey's highlights:

  • A third of small employers not offering health insurance say they are either extremely or very likely (11 percent) to add this benefit in the next two years
  • Firms offering coverage tend to pay more and have a larger percentage of full-time employees than those that do not. Firms not offering coverage employ a larger percentage of women, young people (under 30) and minorities.
  • Employers offering coverage believe it has positive impacts on their business, but those not doing so do not identify any negative benefits of their decision.

"The cost pressures of rising health insurance make it likely that employees at small employers will continue to pay more for health insurance—if their employer offers the benefit at all," said EBRI President Dallas Salisbury. "This survey shows that those small employers that offer coverage are struggling to find ways to deal with this issue."

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