Small Business Owners Value Choice of Plans for Employees

More than half of small business owners who currently provide their employees with health benefits are willing to offer a choice of health plans while paying a fixed cost, as long as the employee pays extra for a more expensive plan, according to a new study from The Commonwealth Fund.

This type of coverage option is a key feature of 17 of 18 state-run Small Business Health Insurance Options (SHOP) marketplaces, through which employers can buy health insurance policies for their workers. Federally run marketplaces will also offer it beginning in 2015.

In the survey of more than 600 small-business owners (those with between three and 50 employees), researchers found that 80 percent of small businesses offering coverage use health insurance brokers or agents. These brokers act as benefit managers for many firms, carrying out a range of functions, including choosing health plans. Because insurance brokers play a considerable role in this market, the degree to which they view the marketplaces as options for employers may affect small-business participation.

The SHOP marketplaces might become unaffordable and lose potential enrollees if substantial numbers of small businesses decide to self-insure — provide insurance to their employees themselves, by setting money aside to pay employees’ health claims. The report finds that among firms using an insurance broker, 26 percent reported that their broker discussed the possibility of self-insuring in 2014.

Self-insured firms do not have to provide essential health benefits under the Affordable Care Act (ACA), nor do they pay taxes on their premiums, thus providing incentives for small firms to self-insure.

In 2013, 60 percent of small businesses offered health insurance to their workers and 41 percent of employees chose to enroll in some of this coverage. When business owners who did not offer insurance were asked why, 75 percent cited costs as the most important reason. The study also found that 37 percent of firms not currently offering coverage had shopped for it in the past five years.

When firms that currently offer health insurance were asked what would make health benefits easier, less expensive, and a better value, the survey found that:

  • Sixty-eight percent said it would be very important to be able to compare plans, costs, benefits, physicians in the network, and other features.
  • Sixty-six percent said that having a broader choice of plans mattered more than being able to buy coverage from the dominant carrier in their state.
  • Eighty-two percent said they would select a narrow-network plan that contracted with 25 percent of the doctors and hospitals in the community, if it would provide premium savings of 20 percent over a broad network plan.

Source: Commonwealth Fund , October 16, 2013

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