Although nearly all large firms (200 or more workers) offer health benefits, firms with fewer than 200 workers are significantly less likely to do so.

Since 2000, the percentage of firms offering health benefits has dropped by 9 percentage points. While the year-to-year changes have been relatively small and not statistically significant, the cumulative effect has been a large and statistically significant change over this five-year period. This change is driven largely by a decrease in the percentage of small firms (3-199 workers) offering coverage, and may reflect several years of high premium growth combined with a sluggish job market.

• Ninety-eight percent of large firms (200 or more workers) offer health benefits in 2005, essentially unchanged from 2004. In contrast, only 59% of small firms (3-199 workers) offer health benefits. This is comparable to the offer rate among all small firms in 2004, but represents a drop in the offer rate for small firms from 68% in 2000. Driven largely by this decline among small firms, the offer rate among all firms has dropped from 69% to 60% over the same time period (Exhibit 2.2).
  
  
• The likelihood that a firm offers health benefits to its workers varies considerably with the firm’s characteristics, such as firm size, whether the firm is higher wage, the proportion of part-time workers in the firm, and whether workers are unionized (Exhibit 2.3).
  
  
• • The smallest firms are least likely to offer health insurance. Only 47% of firms with 3-9 workers offer coverage, compared to 72% of firms with 10-24 workers and 87% of firms with 25-49 workers. Nearly all firms with 50 or more employees offer health insurance coverage (Exhibit 2.2).
    
    
  • Higher wage firms – where fewer than 35% of workers earn $20,000 or less annually – are more likely to offer health insurance than lower wage firms – where 35% or more of workers earn $20,000 or less annually. Sixty-five percent of higher wage firms offer health benefits compared to 43% of lower wage firms (Exhibit 2.3).
    
    
  • Firms with fewer part-time workers – where less than 35% of employees work part-time - are also more likely to offer coverage to their workers than firms with many part-time workers. Among firms with fewer part-time workers, 68% offer health insurance, compared to 36% of firms with a higher percentage of part-time workers (Exhibit 2.3).
    
    
  • Firms that employ union workers are much more likely than firms without union workers to offer health benefits to their employees. Ninety percent of firms with union workers offer health benefits, whereas only 59% of firms that do not have union employees offer health coverage (Exhibit 2.3).
    
    
• Among firms offering health benefits, few offer benefits to their part-time and temporary workers. Twenty-eight percent of firms offer health benefits to part-time workers and 3% of firms offer benefits to temporary workers (Exhibits 2.4, 2.5).
  
  
  • In 2005, 28% of all firms that offer health benefits offer them to part-time workers. Larger firms are more likely than smaller firms to do so. Only 27% of firms with 3-24 workers that offer health benefits offer them to part-time workers, while 61% of jumbo firms (5,000 or more workers) do so. (Exhibit 2.4).
    
    
  • Regardless of firm size, very few firms that offer health benefits (3%) offer them to temporary workers. The percentage of firms offering health benefits to temporary workers has remained essentially unchanged over the last several years (Exhibit 2.5).
    
    
• Despite a slowing of health insurance cost growth in 2005, the cost of health insurance remains the main reason cited by firms for not offering health benefits.
  
  
  
  • Of firms not offering health benefits, 73% cite high premiums as a “very important” reason for not doing so. Other factors frequently cited by all firms as “very important” reasons for not offering coverage include: employees are covered elsewhere (33%) and firm can attract good employees without offering health insurance (22%) (Exhibit 2.6).
    
    
• Among firms not offering health benefits, 41% report shopping for coverage in the past year. Twenty-three percent of firms not offering coverage report that they have offered coverage at some point in the past five years.
  
  
• Although cost is often identified as the primary reason that many firms do not offer health benefits, their decisions may also reflect their views about their employees’ preferences for higher wages over health benefits. When non-offering employers were asked to assess whether their employees would prefer an additional $2 per hour in wages (approximately the cost of health insurance per worker) or health benefits, over 70% answered that their employees would prefer higher compensation rather than receiving health benefits (Exhibit 2.8).
  
  
• Consistent with past years, very few employers indicate that they are likely to drop coverage in the near future. Three percent of all firms say that they are either “very likely” or “somewhat likely” to drop coverage in the next year. Similarly, just under 2% of employers say that they are “very likely” to restrict eligibility for benefits in the next year, with an additional 9% indicating that they are “somewhat likely” to do so. Responses to these questions vary little by firm size (see Section 12).

For more information regarding survey methodology, click here to view the Survey Design and Methods section.

For more information regarding survey methodology, click here to view the Survey Design and Methods section.

For more information regarding survey methodology, click here to view the Survey Design and Methods section.

For more information regarding survey methodology, click here to view the Survey Design and Methods section.

For more information regarding survey methodology, click here to view the Survey Design and Methods section.

For more information regarding survey methodology, click here to view the Survey Design and Methods section.

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005.

For more information regarding survey methodology, click here to view the Survey Design and Methods section.

For more information regarding survey methodology, click here to view the Survey Design and Methods section.