More Small Employers Restore Health Benefits

Many small employers that dropped health insurance coverage for their employees after the Affordable Care Act took effect have reinstated the benefits as competition for talent increases.Companies with fewer than 50 employees are not required to provide health insurance benefits to their workers under the ACA, and after the law took effect, many dropped coverage to let their workers instead buy coverage on public insurance exchanges. Most small businesses also made the change to shift their employees to individual coverage because their workers were eligible for significant government subsidies.

But since the exchanges began operating in 2014, the labor market has changed and competition for good employees is increasing. And in many places around the country, the options for coverage on public exchanges can be meager, often with shrinking plan choices and plans with narrow networks, placing a higher burden on individuals who buy coverage through exchanges.

The Wall Street Journal interviewed several small business owners – most with fewer than 20 employees – that had dropped grouped coverage in 2014 due to the cost and complexities of picking the right plan for their workers.

One small business owner in Missouri dropped coverage and instead gave her employees a raise so they could buy it on their own. The owner is now looking at group health insurance again, particularly after her job offers were turned down by some prospects who cited the lack of group health benefits for their decision. On top of that, the insurer she is covered by through a public health insurance exchange has decided to pull out of Missouri for the 2017 plan year.

There are no clear estimates of how many small businesses offer group coverage. The Kaiser Family Foundation conducted a survey in 2015 that found that 54% of companies with three to 49 workers offered health benefits last year, about the same as in 2014 but down from 66% in 2000. Companies with three to 50 employees paid an average of $15,602 annually for each worker who elects family coverage, according to Kaiser, up from an average of $12,809 in 2010.

Brokers around the country are seeing small businesses that dropped coverage looking to restart it for 2017. The economics of offering coverage and a growing economy that has started to result in an uptick in competition for workers is the driving force behind the renewed interest. And employers that did drop group health coverage also felt the effects from employees who believed they were missing out on a benefit that is standard at many other companies.

The effects of dropped coverage on employee morale cannot be overestimated when those workers had to sit down, do homework, fill out applications on exchange websites and start paying their own health premiums out of pocket.

Also, employees who have been shunted into exchanges are seeing coverage that is growing less attractive as insurers shrink their networks of doctors and hospitals and reduce the number and types of medication they will pay for. Employers are recognizing the hardships that their employees have encountered as a result of using exchange-purchased coverage. And some of those employers are reinstating group health benefits out of a sense of duty to their staff, the Wall Street Journal reported.