JOB-BASED INSURANCE: Small Employers Unaware of Options
Only 48% of California's small employers (10-49 workers) offer employee health coverage, largely due to prohibitive cost, a new study released yesterday by the California HealthCare Foundation reports. Sixty percent of non-sponsors cite cost as one of the top two reasons they forgo offering job-based insurance, with many respondents indicating that they "are unaware of regulations that can reduce the financial burden of offering coverage," the survey reveals. Forty-two percent did not know that their contributions to employee premiums would be tax deductible, and 75% said they were "unaware of laws that prevent insurers from refusing to sell coverage to employers or charging them significantly more than their standard rates." In contrast, employers that provide insurance were much more informed about regulations and their options, the report notes. California HealthCare Foundation president and CEO Mark Smith says that employers' ignorance of these laws could throw a wrench into current efforts to expand coverage through similar methods. "Tax deductibility has been a key element in recent proposals to expand health coverage put forth by political candidates and policymakers. Yet we find that many small employers don't know about and don't make use of the write-off," he explained. Surprisingly, 40% of small business non-sponsors do not identify cost as the main factor in their decision, claiming instead "employees get coverage elsewhere" (41%) and that "employee turnover is too high" (26%). Beth Umland of William M. Mercer, Inc., pointed out, however, that those firms offering insurance tend to yield lower turnover rates, indicating that "savings from hiring and training staff could help offset the cost of offering a health plan." Despite this potential benefit and others, namely a healthy work force and lower insurance costs than the national average ($2,865 annually verses $3,321), California's small employers remain more hesitant than the others nationally to offer coverage. The national average of small employers who offer health coverage is 53%. Other survey findings include:
- Wholesalers and retailers comprise 39% of non-sponsoring small firms.
- Only 45% of California employees who lack job-based coverage earn more than $30,000 annually.
- Eighty-five percent of non-sponsoring company owners or presidents are insured.
- One-fifth of non-sponsors have offered insurance in the past and two-fifths have considered offering it.
- Most small employers that do offer coverage provide it only to full-time employees, but two-thirds of plan sponsors have one or more part-time workers.
- Sixty-one percent of small California firms that cover workers choose HMOs, 24% use PPOs, and 13% are enrolled in point- of-service plans (CHCF release, 11/11).