Family Health Insurance Is No Longer Affordable Through Small Employers

One thing that really jumped out from our 25th annual KFF employer health benefit survey: Small employers no longer have affordable coverage for workers with families.

Workers employed by small firms—those with fewer than two hundred employees—would need to pay $8,334 on average towards the premiums each year for family coverage. Employers pay the difference on premiums that average $23,621 for family coverage. But enrolling a family at these firms can often be much more– a quarter of covered workers at small firms must pay $12,000 annually or more to enroll in family coverage. Covered workers at small firms on average must pay a larger share of family premiums than those at larger firms.

That doesn’t include what workers’ pay for deductibles or other out-of-pocket costs which also are typically higher at small firms. And those deductibles can really add up: Take, for example, a worker enrolled in a preferred provider organization (PPO) plan at a small firm, where the deductible applies to the entire family. The family would be on the hook for over $3,900, on average, before the plan begins to chip in on most services.  Big deductibles are commonplace for families covered by small firms: 57% have to pay $3,000 or more before at least one member of the family meets the deductible and the plan starts covering most services. For over a third (35%) of covered workers at small firms, the deductible is at least $5,000, and may be more if multiple people in the family have to spend against the deductible in a year.

The bottom line: For many of the almost 50 million people working for the 3.2 million smaller companies in America, family coverage is no longer affordable. It is likely to be prohibitive for the really small companies, the pizza shop, the dry cleaners, or the bakery. On average, workers at these firms have fewer resources to cover health costs: Salaries at firms of less than 200 employees are $44,600 on average compared to $63,200 for workers at larger firms.

In a large survey we recently did of consumers with different kinds of coverage, between two-in-10 and three-in-10 lower income workers with employer coverage reported problems paying their medical bills, or that they could not pay them at all, in the last year. It’s logical that affordability challenges are always much worse for people who are chronically ill or who have major illnesses and need more care but that’s also the opposite of how a health system should work.

While the costs rise, workers at smaller firms may not have a lot of other options. The Biden Administration’s fix of the Affordable Care Act’s “family glitch” provides a more affordable option for some family members of workers at small businesses, but many have no choice but to pay a lot for employer family coverage or go uninsured. Eligibility and offer rates among small firms have remained steady, meaning a similar share of workers can enroll in benefits, but that does not always mean the offer fits into a family’s budget. Employer coverage can be quite robust for lots of workers, but benefits and costs are not consistent across employers.

There have been a variety of proposals made to open up marketplace coverage for more workers in small firms and to subsidize their coverage. The issue is complex and full of tradeoffs but well worth further policy development.

There are two health cost crises in America: national health spending and its impact on the country, and this one, affordability and its impact on the American people. Both are and will continue to be consistent themes in KFF’s work.

View all of Drew’s Beyond the Data Columns

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