A new United Benefit Advisors (UBA) survey found that small employers have similar health insurance benefits compared to the average employer, and contain costs better than other companies.
However, employees at small businesses “must shoulder a much greater portion of the monthly premiums, especially for families,” according to UBA.
The UBA report, called “Small Businesses Keeping Pace with Nationwide Health Trends,” found employees across all plan types pay an average of $3,378 annually for health insurance benefits and employers pay $9,727. For small businesses, employees pay $3,557 and the small employer covers $9,474.
Popular belief has usually been that employers who have fewer than 100 people on their payroll can’t compete with larger companies when it comes to health insurance benefits. However, the UBA said its survey “shows that small businesses actually cut a better deal even compared to their largest counterparts — their costs are generally below average. For example, the average annual cost per employee (all plans) is $9,727, but for small groups with 25 to 49 employees, the average cost per employee is only $9,165.”
UBA said small businesses’ copays, deductibles and health savings account (HSA) funding are in line with average employers. In fact, companies with 49 or fewer employees contribute more to HSAs than larger companies.
Small businesses are an important voice in health policy, as nearly half of all U.S. workers are in a business employing 500 or fewer people. The survey results are encouraging for staffers at these businesses, but the finding regarding higher costs being passed on to employees is a concern.
Though small employers are competitive compared to average businesses, UBA said they differ from other companies in two key ways. Small businesses are passing nearly 6.6% more of the costs for single coverage and nearly 10% more of the costs of family coverage onto employees compared to all companies and nearly 18% for single coverage and more than 50% for family coverage when compared to large employers. Plus, small businesses have higher out-of-pocket maximums, especially for families. The average in-network out-of-pocket expense limit for employers with fewer than 100 employees is $10,000, compared to $7,300 for larger employers.
Containing out-of-pocket costs is a big aspect of the current discussions on health policy. Part of the impetus behind the Affordable Care Act (ACA) was soaring costs for patients who had skimpy coverage with high premiums and deductibles, as well as annual or lifetime caps. Premium costs are being watched closely right now in the ACA marketplaces, as several major payers say uncertainty in the White House in Congress, particularly regarding cost-sharing reduction payments, is forcing them to jack up premium rates by the double digits.
Many smaller businesses would likely be happy with a change to the ACA being considered by a bipartisan group of lawmakers. It would change the employer mandate so that it applies to businesses with 500 or more employees, instead of 50 or more employees as it does now. That wouldn't be likely to have much effect on coverage rates, though, because most small businesses offered coverage before the ACA mandate.
UBA President Peter Weber said employers with 500 or more employees may offer better coverage, but small employers can offer more flexibility. "Small employers would do well to benchmark their plans against their same-size peers and communicate how competitive their plans are relative to average national costs, deductibles, copays and more," he said.