Employer-based health insurance offerings increase for first time in decade
After nearly a decade of declining employer-based health insurance plans, the overall percentage of private-sector employers offering health benefits in 2017 increased for the first time since 2008, according to the Employee Benefit Research Institute.
In a webinar on the topic on Thursday, EBRI said the strong economy is mostly the reason for the increase, including low unemployment, fewer self-employed people, more employees moving to larger companies and more people transitioning from part-time work.
Despite improved numbers, the National Federation of Independent Business (NFIB) said costs associated with health benefits remain the No. 1 problem for small businesses.
Experts believed that many businesses would drop health insurance after the Affordable Care Act. The law makes it easier for people to get health insurance on their own, such as through the exchanges. With that in mind, more employers were expected to drop coverage and let employees get insurance themselves.
Also, the country was in a recession a decade ago with unemployment at about 10%. A weak labor market meant that businesses didn't need to offer competitive health benefits to compete against other companies, said Paul Fronstin, director of health research at EBRI.
This combination was a recipe for employers, especially small businesses, to drop insurance. In the years after the ACA, more smaller companies dropped coverage. That's changing, and the economy and shifting healthcare costs to consumers are the reasons.
EBRI found that since 2014, when the ACA exchanges went into effect, the number of private sector businesses offering health insurance has actually increased. After years of a decline, EBRI first saw the change in 2015. Mid-sized employers (100-999 employees) increased from 92.5% in 2014 to 95.1% in 2015 and eclipsed 96% over the past two years.
Another trend in 2017 is that more small businesses are offering health insurance compared to previous years. "It's this increase that's driving the overall number up. You have to remember most employers in the U.S. are small," Fronstin said.
Despite more businesses offering insurance, the costs associated with health benefits remain a major problem for small businesses, Holly Wade, director of research and policy analysis at NFIB, said. Small businesses have listed the cost of health insurance as their No. 1 problem and priority since 1986, she said.
In 2016, a survey of small businesses found that 52% of respondents believed health insurance costs were the most critical problem ahead of "unreasonable" government regulations and federal taxes on business income. Only 8% of respondents said healthcare costs were not a problem.
Though slightly more than half consider health costs their No. 1 problem, health insurance costs aren't as much of an issue for small businesses as they were 14 years ago when 66% of small businesses said it was a critical issue.
One reason for the reduced concern is that benefit design changes have created high-deductible health plans and shifted more costs onto employees. NFIB found in a 2015 survey that 36% of small companies provide higher deductibles as a way to control healthcare costs, 30% increase copays, 20% reduce benefits and 18% offer restricted networks.
All of these actions have helped cut costs for businesses. A recent Mercer's survey found that employer-sponsored health insurance costs have increased about 3% annually since 2012. A decade ago, annual cost growth was more than double that percentage.
Despite those improved numbers, many small businesses still face annual double-digit cost increases. Mercer said about one-third of smaller employers saw health insurance cost increases of more than 10% in 2017.
A strong economy is benefiting employer-based health insurance numbers now, but employer-based coverage will be tested in the next economic downturn. When that happens, it will be the first time the country faces a recession with the ACA providing an alternative for employer-based coverage, Fronstin said.
He suggested that higher unemployment could lead businesses to drop coverage with the belief that their employees can get individual coverage through the exchanges. "That's when our traditional employer-based system gets put to the test," Fronstin said.
- Employee Benefit Research Institute After Years of Erosion, More Employers are Offering Health Coverage; Worker Eligibility Higher
- Mercer MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS