Small Employers Lead Workplace Health Coverage Decline

September 14, 2005 ( - A falloff of small businesses offering workplace health coverage has led to an overall dramatic dropoff of companies offering the insurance policies.

A news release said that was a key finding of the 2005 Annual Employer Health Benefits Survey released Wednesday by the Kaiser Family Foundation and Health Research and Educational Trust.

Three in five firms (60%) offered coverage to workers in 2005, down significantly from 69% in 2000 and 66% in 2003 – with almost all of the decline taking place in the small end of the market, according to the research. Nearly all businesses (98%) with 200 or more workers offer such employee coverage.

“It is low-wage workers who are being hurt the most by the steady drip, drip, drip of coverage draining out of the employer based health insurance system,” Kaiser Family Foundation President and CEO Drew Altman said in the news release.

According to the Kaiser study, premiums increased an average of 9.2% in 2005, down from the 11.2% average found in 2004 (See Health-Care Premiums Up 11% in 2004 ). The 2005 increase ended four consecutive years of double-digit hikes, but the rate of growth is still more than three times the growth in workers’ earnings (2.7%) and two-and-a-half times the rate of inflation (3.5%). Since 2000, premiums have skyrocketed by a whopping 73%.

The annual premiums for family coverage reached $10,880 in 2005, eclipsing the gross earnings for a full-time minimum-wage worker ($10,712). The average worker paid $2,713 toward premiums for family coverage in 2005 or 26% of the total health premium. While workers’ share of their premium has been relatively stable over the past few years, they are now paying on average $1,094 more in premiums for family coverage than they did in 2000.

Consumer Directed Plans

The survey found that one in five of employers who offer health insurance now provide a high-deductible health plan option. Jumbo firms – those with 5,000 or more workers – are significantly more likely than smaller firms to offer a high-deductible plan option, with 33% doing so this year.

Among employers who offer a high-deductible plan, relatively few (19.5%, or 3.9% of all offering employers) also make a contribution to a health reimbursement arrangement (HRA), offer a plan that would permit an enrollee to establish a health savings account (HSA), or both.

Despite the growing availability of high-deductible plans, relatively few workers are enrolled in consumer-driven arrangements. The survey estimates that this year about 2.3% of non-federal covered workers, or 1.6 million people, are enrolled in high-deductible health plans with an HRA, and about 1.2%, or 810,000 people, are enrolled in plans that are eligible for use with an HSA.

More Highlights

Other highlights from the 2005 survey include:

  • Firms that do not offer health benefits to their workers – the overwhelming majority of whom are small firms – were most likely to cite cost as a key factor, with nearly three in four (73%) saying high premiums were “very important” to their decision.
  • In 2005, PPO plans were more common than ever, with 61% of all employees with health coverage enrolling in a PPO (up from 55% in 2004). Enrollment in HMOs, which generally cost less than PPOs, fell to 21% in 2005 from 25% in 2004. Conventional, or indemnity, benefit plans have all but disappeared, covering just 3% of covered workers.
  • Looking toward the future, more than four in 10 of large firms (200 or more workers) offering health benefits say they are “very likely” to ask employees to pay more in premiums next year, while just 15% of smaller firms say they plan to do so.
  • About eight in 10 covered workers (81%) are in a health plan that uses case management for high-cost claims. Most covered workers also must get prior certification for inpatient services (75%) and outpatient surgery (55%).
  • Few employers have a lot of confidence in strategies to contain rising health-care costs. For example, 16% of employers say consumer-driven health plans are “very” effective at controlling costs, while another 45% say they are “somewhat” effective.

The 2005 Employer Health Benefits Survey was conducted between January and May of 2005 and included 2,995 randomly selected, non-federal public and private firms with three or more employees (2,013 of which responded to the full survey and 982 of which responded to an additional question about offering coverage).

The full survey is here .