EBRI: Midsize and small employers add coverage in 2016 after years of decreases

Health insurance benefits form
The number of midsize and small employers offering insurance increased slightly in 2016.
(Getty/michaelquirk)

The number of smaller employers offering health benefits to employees appears to be on the rebound after a downturn under the Affordable Care Act, according to a new report.

Many analysts predicted that employers would drop coverage under the ACA, but that didn’t prove to be true with large employers of 1,000 workers or more, where the rate of organizations offering insurance has been consistently more than 99% since the law took effect, according to a report from the Employee Benefit Research Institute.

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But smaller employers, with between 10 and 999 employees, did cut coverage. However, EBRI found that rates had a slight uptick last year:

  • The rate for employers with 10 to 24 employees increased from 48.9% to 49.4%
  • The rate for employers with 25 to 99 employees increased from 73.5% to 74.6%
  • For employers with between 100 and 999 employees, the rate increased from 95.1% to 96.3%. This group saw improvement in 2015 as well.

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The rate did decline among the smallest employers (10 employees or fewer), though, from 22.7% to 21.7%.

There are several factors that play a role in how large and small employers view insurance benefits. Smaller employers have been less inclined to offer insurance benefits to employees in general, as they often face far steeper premium increases, according to EBRI. Smaller employers are also less likely to view insurance benefits packages as key to hiring and retaining staff.

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Many small employers were also hit hard by the economic downturn in 2008, dropping coverage at that time without picking it back up when the economy became more stable.

As far as the ACA specifically, smaller employers were more likely to be concerned that coverage requirements and regulations could make providing employee health insurance even more expensive. Plus, employees at these smaller groups could find plans on the exchanges that were potentially more robust than their employers could provide.

But what changed beginning last year? Premium increases have been relatively low and “less volatile” than compared with the early days of the ACA, and the job market has also stabilized significantly compared to a decade ago, the report noted.

The future of employer-based insurance could depend heavily on what happens next for health policy. Employers have, on the whole, moved toward benefits packages that include greater cost sharing and that trend is likely to continue. If the ACA's exchanges are allowed to mature into robust programs, it could lead to more employers pulling sponsored coverage, according to the report.