Small Employers and Health Benefits: Findings from the 2000 Small Employer Health Benefits Survey

This paper presents findings from the 2000 Small Employer Health Benefits Survey. The survey examines a number of issues related to small employers (between two and 50 workers) and their decision whether to offer health benefits to workers. The goal of the survey was to gather information to better understand what would make more small employers offer health benefits. Since the vast majority of large employers offer health benefits, but many small employers do not, small businesses are seen as perhaps the most crucial factor in efforts to reduce the growing number of uninsured Americans. There are many reasons why small employers do not offer health benefits. While small employers report that cost is the primary reason they do not offer health benefits, many other factors may also contribute to their lower coverage rates. For example, small employers that do not offer health benefits often are not aware of the value of offering benefits, do not understand how the tax code provides incentives to offer benefits, and do not understand how insurance laws have addressed the accessibility and affordability of health benefits. Specifically, findings from the survey indicate that 57 percent of small employers did not know that they can deduct 100 percent of their health insurance premiums. Also, more than 60 percent did not know that insurers may not deny health insurance coverage to small employers even when the health status of their workers is poor. Findings from the survey also indicate that many small employers that do not offer health benefits are potential purchasers. Twelve percent are either extremely or very likely to start offering health benefits in the next two years, and 17 percent are somewhat likely to start offering health benefits. A number of factors would increase the likelihood that a small business would seriously consider offering a health benefits plan. Two-thirds of small-business owners said they would seriously consider offering health benefits if the government provided assistance with premiums. Almost one-half would consider doing so if insurance costs fell 10 percent. In addition, one-half would be more likely to seriously consider offering a health benefits plan if employees demand it. The survey was conducted within the United States between May 16 and June 30, 2000, through 20-minute telephone interviews with 506 companies with health benefits and 449 companies without health benefits. The SEHBS was co-sponsored by the Blue Cross and Blue Shield Association (BCBSA); the Employee Benefit Research Institute (EBRI); and the Consumer Health Education Council (CHEC). Mathew Greenwald & Associates, Inc., conducted the survey. The paper presents the survey's findings on various topics concerning health benefits and small employers. These topics include the tax treatment of health benefits, knowledge of insurance regulations, the impact that offering health benefits has on employers, the difference between employers that do and do not offer health benefits, worker and family participation in health benefits, the likelihood that employers will offer health benefits in the future, and the impact of future costs and tax incentives on employer behavior.