Pre-pandemic small-group insurance market remained stable – BenefitsPro

For companies with fewer than 50 employees, employees contributed 29% of premium costs in 2013 for family plans, rising to 35% in 2020.

The small-group health insurance market remained relatively stable from 2013-2020, a new study from the Urban Institute has found. The study said that health insurance enrollment among employees of small companies averaged between 8.9 and 9.6 million enrollees during the seven-year period.

In the U.S., only about half of small employers (companies with fewer than 50 employees) offer health insurance to employees, while 99% of large companies offer health plans. But the percentage of small companies offering plans has held relatively steady.

The study noted that with the introduction of the Affordable care Act (ACA) some industry observers predicted that fewer small firms would offer health plans, since the ACA did not require small employers to offer coverage. Those predictions did not prove accurate.

“The rate at which small firms offer health insurance coverage decreased by just 2.6 percentage points from 2013 to 2020,” the study said. “For comparison, it declined by 10.6 percentage points from 2002 to 2012. Steady offer rates likely reflect consistent demand for employer-sponsored coverage from small-firm employees and greater stability in health insurance costs resulting from ACA reforms.”

Challenges for small companies

The study found that the smallest employers were the least likely to offer health insurance. The share of employees with insurance was about 81% for companies with 25-99 employees, 56% for companies with 10-24 employees, and 30% for companies with fewer than 10 employees.

Lower-paying jobs also were less likely to offer insurance in the small group market. “Because the value of the employer tax exclusion for health insurance rises with income, low-wage firms were less likely than high-wage firms to offer insurance,” the report said. “In 2020, only about one-quarter of workers employed by small, low-wage firms were employed in firms that offered health insurance; this is slightly lower than the 28 percent offer rate for this group in 2013. The gap in offer rates between low- and higher-wage small firms consistently exceeded 31 percentage points between 2013 and 2020.”

The COVID-19 pandemic also had an impact on small-group insurance—although small group insurance rates had held relatively steady in previous years, with 8.9 million to 9.6 million employees covered nationally, that enrollment number dropped to 7.9 million in 2020, likely due to decreases in employment by smaller companies during the early months of the pandemic.

Costs to employees rose

During this time period, the total cost of insurance premiums rose at relatively similar levels for both individual and family coverage. However, there was more variation in the employee contribution rate for premiums, especially for family coverage. The study found that companies with 1,000 or more employees had relatively flat rates of premium contributions by employees for family plans, at about 26% by 2020. Companies with 100-999 employees saw more volatility in family plans, with employee contributions as low as 29% in 2014 and reaching 33% in 2016, ending at 32% in 2020. For companies with fewer than 50 employees, employees contributed 29% of premium costs in 2013 for family plans, rising to 35% in 2020. On the other hand, the report noted that very small companies—those with fewer than 10 employees—had the lowest employee contribution rates in the last decade for both single and family plans.

Another interesting finding of the study: self-insured plan offerings grew from 13.2% in 2013 to 16% in 2020. This relatively modest growth was also counter to some predictions when the ACA was launched, the report noted. “Despite early fears that small firms would transition to self-insurance en masse to avoid market regulations, small firms were less likely to offer self-insurance than larger firms,” the study said.