Small Businesses Less Ready to Offer Workers Health Insurance

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September 13, 2004 -- Workers in small businesses are less likely to receive health insurance from their employers, as premiums rose by 11.2% over the last year, according to a recent survey. The percentage of small firms (3-199 workers) that offer health insurance to their workers was 63% in 2004, down from 68% in 2001, according to a joint survey by the Kaiser Family Foundation, and the Health Research and Educational Trust.

The survey, which tapped more than 3,000 public and private firms revealed a 4% decline in employee health coverage, with only 61% of all employees working in large and small businesses receiving employer coverage -- down from 65% in 2001. It is estimated that five million fewer jobs provide health insurance in 2004 than in 2001.

According to the survey, the drop in employer-sponsored coverage is likely due to years of double-digit premium increases. Premiums for employer-sponsored health insurance rose 11.2% over the last year. The increase over the year has been slower than the 13.9% increase seen during 2003; however, increases in premiums have been in double digits for the last four years. The increase is also larger than of overall inflation (2.3%) or wage gains (2.2%) over the same period.

The results raise the question of whether smaller firms will continue to support family coverage for their employees. Already, smaller firms contribute significantly less than larger firms (200 workers or more) towards family coverage, and with rising premiums, support for family coverage could worsen.

Since 2000, premiums for family coverage have increased by 59%, compared with inflation rate of 9.7% and wage growth of 12.3%, the survey showed. The cost of family coverage today is almost $10,000 per year (roughly a year's work at minimum wage). Smaller firms, which pay their workers less on average than larger firms, may find it hard to fit family coverage into their employee compensation packages should costs continue to rise.