Small Employers Say Providing Health Care is Too Much

October 21, 2008 ( - The majority of U.S. employers that do not sponsor an employee health plan (almost exclusively small employers, with fewer than 500 workers) believe that, at its current price, providing employee medical coverage is far beyond their means, according to a new survey.

In a news release, Mercer said the majority of employers that do not provide health benefits say they would not contribute even $50 a month to cover an employee, while the majority of those that do provide benefits favor mandatory coverage for all. Over a third of U.S. employers do not sponsor an employee health plan, and one of the central questions of the reform debate is how they might be induced to do so, the release said.

When asked their primary reason for not offering health coverage, 43% of employers without employee plans answered “I can’t afford it.” Other reasons included employees being covered under other plans (20%), high workforce turnover (9%), and the perception that employees would rather have more pay than health coverage (9%).

When asked if they were to offer a health plan, how much they would be willing to contribute per employee per month, 59% answered from zero to no more than $50. Only 10% said they would pay at least $200.

About half of these employers say it is very unlikely that they will offer a plan in the next three years (49%) and only about a fourth say it is somewhat likely.

According to the Mercer news release, 41% of employers oppose a plan to end or cap the tax exclusion for employer-sponsored health benefits, while just 30% are supportive. The larger the employer, the more likely it is to disapprove (57% of those with 20,000 or more employees disapprove).

Half of all employers oppose "play or pay" laws, which would require employers to either offer health coverage or pay into a government fund to cover the uninsured (31% are supportive and 19% neither approve nor disapprove). Wholesalers/retailers (68%) and manufacturers (56%) are most likely to disapprove of a "play or pay" requirement.

Only two of the reform ideas have the support of the majority or near-majority of employers. Fifty-three percent support requiring individuals to have health coverage if they can afford it, either through their employer or purchased on their own.

A health care system like Canada's - where the federal government is the sole payer for health care services - was rejected by the majority of employers (51% of all employers and 63% of very large employers).

Nearly half employers (46%) support having the federal government provide stop-loss protection to cover an employer's catastrophic expenses.

Mercer said its survey identified employers with workers in Massachusetts, San Francisco and Vermont, which have enacted broad-based health care reforms requiring employer compliance, and asked them what actions they had to take to comply and how burdensome these actions were. Of the 384 employers with workers in Massachusetts, where reforms are the most complex, 79% have been required to take some action, including: collecting information to meet new reporting requirements (72%); establishing a new Section 125 plan (41%); modifying an existing plan (12%); or establishing a new ERISA plan (10%).

However, only 4% reported that these efforts required "considerable" resources. Most reported that they required "minimal or no resources" (58%) or "some resources, but [not enough to affect] other priorities" (38%).

Almost nine out of ten large employers (86%) said they were concerned or very concerned about the impact of state or local health reform initiatives on cost. Seventy-one percent are concerned about losing the flexibility to design programs to meet organizational needs, and 64% are concerned about losing ERISA protections.

The survey was completed by 545 employers that do not offer employee health coverage, and nearly 2,900 employers that do.