While small businesses are aware of the benefits of health insurance, many employers are concerned about rising health care costs. Most companies that don't offer health insurance say it's too expensive for them, according to a survey by eHealth.
In January 2024, eHealth surveyed 560 small and medium-sized business owners using a third-party survey tool. Nearly half of survey participants run businesses with fewer than 50 employees.
Small business owners know that offering health insurance is key to attracting and retaining high-performing employees.
"These are challenging times for small employers," the study begins. "Most say it's harder to find good employees today than it was three years ago. While some simply can't afford it, offering group health insurance helps many recruit and retain quality employees."
More than two-thirds of small business employers reported that they offer group health benefits (68 percent). Nine out of ten of them agreed that this approach has had a positive impact on their recruitment and retention rates. This is significant for employers at a time when more than eight in ten employers say it is harder to find and retain talented employees today than it was three years ago.
For most small businesses (82 percent), insurance coverage costs $200 or more per employee per month, and 29 percent spend at least $500 per month per employee.
More than one-third of respondents said they cannot pay for health benefits because the cost is unaffordable (35%). One-third of respondents could spend up to $100 per month per employee - less than half of what a typical small business spends on these benefits per employee per month. Another 17 percent were able to spend between $100 and $200 per employee per month.
For those who can currently afford insurance, the situation is still challenging. Many say it won't take many increases to make health insurance unaffordable: 47 percent of employers offering group health insurance plans said a 15 percent increase in premiums would make it impossible to provide health insurance.
Health insurance costs for small business employers go beyond dollar amounts. The administrative burden can also be overwhelming. Three in 10 employers cited managing group health plan benefits as a "huge burden."
Employers are not required to offer group health insurance plans. Individual health insurance plans can be a very effective source of coverage for small business employees. However, new regulations and a lack of awareness of individual health insurance options are holding back their uptake among employers.
New regulations that will take effect in March 2024 may entitle gig workers to health benefits, but 47% of employers are unaware of this development. In addition, more than half of employer respondents are unaware of individual health care reimbursement arrangements (ICHRAs), a well-known alternative to group health plans (55%).
While many large businesses also struggle with unsustainable costs and hiring challenges, large employers have significant influence over the cost of health insurance. Small businesses, on the other hand, have little leverage and face a steep cost cliff. To remain competitive, these employers may need to increase their awareness of group health insurance alternatives.