Snapshots: Employer Sponsored Health Insurance – A Comparison of the Availability and Cost of Coverage for Workers in Small Firms and Large Firms
Employer Sponsored Health Insurance – A Comparison of the Availability and Cost of Coverage for Workers in Small Firms and Large Firms
The majority of businesses in the United States are small businesses. Of the over three million firms with three or more workers, roughly 98% have between three and 199 employees. Small firms employ about 40% of all workers and about 34% of workers who receive health insurance through their own job.1
Small and large firms vary substantially on health insurance sponsorship rates and costs. Small firms are less likely to offer coverage, and health plan benefits often differ between small and large firms. This Snapshot expands on information presented in the 2008 Kaiser/HRET Survey of Employer-Sponsored Health Benefits to look exclusively at the differences in offer rates, plan costs and cost sharing for small firms and large firms and includes an analysis of out-of-pocket payments from 2004 and 2005 Medical Expenditure Panel Survey data.
We generally use “small firms” to describe firms with three to 199 workers and “large firms” to describe firms with 200 or more workers. Information on the survey’s methodology can be found in the 2008 Kaiser/HRET Employer Health Benefits Survey full report.2 Family coverage is defined as health coverage for a family of four. Differences noted in the text are statistically significant at the 0.05 confidence level.
Health Insurance Offer Rates
Small firms are much less likely to offer health insurance than large firms. Of firms with 3 to 199 employees, 62% offer health insurance to their employees, a stark contrast to the estimated 99% of firms with 200 or more employees that offer coverage (Exhibit 1). Very small firms (3-9 workers) are least likely to offer health insurance to employees, with only 49% of these firms offering coverage in 2008. Small firms may not offer coverage for a variety of reasons, including inability to afford premiums, employees may be covered elsewhere, or the firm may feel that the benefit does not impact their ability to recruit and retain qualified employees.3
Workers in small firms have lower average premiums for family coverage than workers in large firms ($12,091 vs. $12,973) in 2008 (Exhibit 2). Average premiums for single coverage are not statistically different for workers in small firms compared to workers in large firms. Given that health insurance provided to small firms has higher administrative and marketing costs than health insurance provided to large firms, the lower average small firm premium for family coverage and similar premium level for single coverage suggests that health insurance benefits are probably less generous on average in small firms. Several indicators of benefit levels are discussed later in this report.
Differences in average premiums between small and large firms vary by geographic region. Average premiums are lower for workers in small firms than for workers in larger firms in the South and the West for both single and family coverage (Exhibit 3). Premium differences in other regions are not statistically significant.
Average Annual Premiums for Covered Workers, Single and Family Coverage, by Size and Region, 2008
Single Coverage Family Coverage NORTHEAST All Small Firms (3-199 Workers) $5,187 $13,371 All Large Firms (200 or More Workers) $4,996 $13,771 Total $5,052 $13,656 MIDWEST All Small Firms (3-199 Workers) $4,957 $13,022 All Large Firms (200 or More Workers) $4,610 $12,707 Total $4,723 $12,809 SOUTH All Small Firms (3-199 Workers) $4,271* $11,461* All Large Firms (200 or More Workers) $4,617* $12,607* Total $4,509 $12,252 WEST All Small Firms (3-199 Workers) $4,293* $11,321* All Large Firms (200 or More Workers) $4,969* $13,104* Total $4,683 $12,351 ALL FIRMS All Small Firms (3-199 Workers) $4,586 $12,091* All Large Firms (200 or More Workers) $4,763 $12,973* Total $4,704 $12,680 *Estimates are statistically different within region between Small Firms and Large Firms (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2008.
Premiums for workers in small and large firms have had similar premium increases over the last decade (Exhibit 4). Since 1999, family premiums have increased 113% for small firms, similar to the increase of 122% for large firms. Since 2004, average family premiums have grown 24% for small firms, similar to the 29% growth for large firms.
The distribution of premiums is also different for small and large firms. Workers in small firms are much more likely to be employed by firms that have a single premium that is less than 80% of the average, compared to workers in large firms (34% vs. 16%) (Exhibit 5). However, workers in small firms are also more likely than workers in large firms to have a premium that is greater than 120% of the average single premium (22% vs. 16%).