Single employees were more likely to respond to premium increases by leaving coverage, while families tended to switch to another plan. The 10% premium increases prompted 7% of single employees to cancel or significantly reduce coverage; 13% to switch to another plan; and 80% to stay on their current plan. This report analyzes these case studies to outline the keys to the success of these organizations. Common strategies include building coalitions around shared interests; obtaining and sharing data on healthcare prices; and proactively informing employees about changes in their health coverage.
This analysis, as well as the contextual discussion of rising ESI costs, provide important guidance for other employers and groups who want to improve the affordability of ESI. While regulations allow for notice after a change in premiums, employers must give employees advance notice. Advance notice is a courtesy for employees and will likely help reduce the number of employee questions. Failure to provide advance notice can also conflict with state payroll laws, which often require employees to consent to certain deductions from their salary.
By continuing to browse our website, you accept our use of the cookie for statistical and personalization purposes. Learn more Mirror, Mirror 2024 is your chance to explore the impact of political decisions on health and well-being in 10 countries, including the U.S. UU. In the U.S.
In the U.S., ESI is broadly divided into markets for small and large groups based on company size (generally with fewer or more than 50 employees), and there are different regulations affecting employers offering coverage based on this threshold.Health insurance regulations for small and large businesses are different and affect employees in different ways. Small employers are not required to offer health benefits to their employees. Meanwhile, large companies are subject to a provision of the Affordable Care Act (ACA) known as “shared employer responsibility.” If workers at a large employer qualify for market tax credits because health insurance costs represent too large a portion of their income or because their plan doesn't cover their expenses enough, then the employer may be at risk of incurring financial penalties. Small business employees benefit from ACA reforms that also apply to the non-group (individual) market.
These reforms include the modification of the community qualification (which limits the ways in which a person's health status can affect their premium), the prohibition of excluding coverage for pre-existing illnesses, and the requirement that plans offered to workers cover designated essential health benefits. 3 Small businesses are not penalized if employees qualify for market subsidies. However, not all small businesses are subject to small group regulations. Nearly 40 percent of small business employees with health benefits work at companies with self-funded plans or with a level of funding level.4 This means that companies, like most large companies, pay directly for their workers' health care claims instead of buying coverage from an insurance company.
This makes these firms largely exempt from the regulations imposed by the ACA and state insurance markets. Although the total amount of premiums in small businesses is lower, both the amount their employees contribute to premiums and the amount of deductibles in their plans are, on average, higher than in large companies. A deductible, which is the amount that employees pay out of pocket before the insurance company pays most health expenses, can place a significant financial burden on employees. Small business employees pay proportionately more for health plans that offer the least; their plans require contributions to the highest premiums and offer less financial protection.
In the case of individual coverage, employees of small businesses in 27 states and D. and C. contributed a higher percentage of premiums than employees of large companies. State variability in the premium contributions paid by small business workers reflects variability in local insurance and health care markets, state insurance regulation, local labor markets, and the type of industry.
There has also been strong growth in the proportion of small businesses that have self-funded or uniformly funded plans, meaning that they generally don't have to comply with ACA regulations for small groups (see “How insurance markets for small and large groups are regulated”, above). This trend may put upward pressure on premiums in some markets for small groups if these companies have healthier workers on average, since covering the rest of the less healthy workers will be more expensive. This higher proportion of premium costs can place a significant financial burden on employees. While total premiums are lower on average in small businesses, employees pay a larger share of them, leading to higher costs for these workers.
An unaffordable deductible can discourage people from seeking health care and increase their risk of accumulating medical debt. 9 Deductibles for individual and family coverage are higher for small business employees and have been consistently higher for these workers throughout the time (table in the appendix). These differences reflect variability in local healthcare and insurance markets, labor markets and industries, and state insurance regulations. The increase in the proportion of workers in small businesses with self-funded plans or with a uniform level of funding may also be a factor.
To the extent that these companies have healthier workers, leaving the small group market can increase premiums for companies that continue to contract insurance for their employees. Ultimately, rising health care costs drive premium costs. Compared to other high-income countries, the United States always has the highest health care costs.11 One of the factors that drive these costs is the prices that providers charge for their services, 12 the variation in health care between states and within states contributes to the variation in state premiums, 13 While all companies face rising premiums, small employers may have less capacity to absorb these rising costs and may have a larger share of these costs to their employees. Half of the small business owners who participated in a 2024 survey reported that employee contributions had increased in response to rising health care costs.
14 small business employees pay more for their health insurance coverage, but receive less financial protection in return. By implementing policies such as those above, legislators could help alleviate the growing financial burden for many workers who have coverage through their employers. The Agency for Healthcare Research and Quality separately reports data on premiums, employee contributions and MEPS (IC) deductibles separately for single people (i.e.For this summary, we present data defined by the size of companies with fewer than 50 employees (“small businesses”) and 50 or more employees (“large companies”). The total premiums in this summary represent the total average annual cost of private group health insurance premiums for employer-sponsored plans, including employer and employee shares.
We also examined trends in the ratio of premiums paid by employees and average deductibles across all company sizes. Due to the MEPS-IC sample size, the AHRQ points out that the statistical accuracy of the estimates must be taken into account punctual in several states. Point estimates for small businesses on employee premium contributions for individual coverage in Idaho, family coverage in Hawaii, Maryland, New Mexico and Wyoming, and spot estimates for small businesses on employee participation in individual coverage premiums in Hawaii and Utah, and for family coverage in Georgia, Hawaii, New Mexico and Wyoming, have a relative standard error (RSE) greater than 30 percent, indicating high uncertainty and low statistical accuracy. According to AHRQ documentation, these one-off estimates are based on a sample of at least 20 companies, but they are still low in accuracy due to variability among respondents.
The authors thank Chris Hollander, Paul Frame, Jen Wilson, Samantha Chase, Bethanne Fox, Tony Shih, Noel Manu, Arnav Shah, Faith Leonard, Celli Horstman, Avni Gupta and Carson Richards, all members of the Commonwealth Fund. Kristen Kolb, Research Associate, The Commonwealth Fund Employer Health Insurance, Small Business, Health Insurance Marketplace, Costs and expenses, coverage and access. When a person is specifically sponsored by an employer (or sometimes jointly by one or more employers and a union, or by a group of employers), it is often referred to as employer-sponsored health insurance or ESI. Working in concert, employers can present a united and stronger front in negotiations with insurers or health systems to demand pricing reforms or to carry out aggregated purchases.
While it seems likely that ESI will continue to be the primary source of health insurance for working families, both employers and working families face challenges related to affordability and access to care. Small business employees pay more for their health insurance coverage but receive less financial protection in return. Peak Health Alliance began in Summit County, Colorado, one of the most expensive regions in the country in terms of health coverage. Once selected, facilities are contacted by mail and phone to find a contact person who is aware of the health insurance benefits offered to employees.
These reforms include the modification of the community rating (which limits the ways in which a person's health status can affect their premiums), the prohibition of excluding coverage for pre-existing illnesses, and the requirement that plans offered to workers cover designated essential health benefits. Employers also provide and collect worker enrollment information and collect employees' share of premiums, dramatically reducing the number of transactions and the amount of unpaid premiums that usually occur when people purchase insurance directly from insurers. The increase in deductibles has had important consequences for the financial protection provided by health insurance. Employer contributions to an employee's health insurance premium represent a significant part of total employee compensation (6.9% in the private sector in June 2002).
As major purchasers of healthcare, many consider that employers have a significant influence on healthcare markets because of their network design. This series examines the causes of the rising cost of employer-sponsored insurance and ways to lower health care prices and improve affordability for workers and employers.
