Small employers and health benefits: findings from the 2000 Small Employer Health Benefits Survey.

Many small employers (between two and 50 workers) are making decisions about whether to offer health benefits to their workers without being fully aware of the tax advantages that can make this benefit more affordable. Fifty-seven percent of small employers did not know that they can deduct 100 percent of their health insurance premiums. Nearly one-half of small employers are not aware that workers who purchase health insurance on their own generally cannot deduct 100 percent of their health insurance premiums. Small employers are largely unaware of the laws that have been enacted by nearly all states and the federal government with the intent of making health insurance more accessible and more affordable for many small employers. More than 60 percent did not know that insurers may not deny health insurance coverage to small employers even when the health status of their workers is poor. Most employers offer sound business reasons for offering health benefits to workers. Many have found that it helps with employee recruitment and retention, increases productivity, and reduces absenteeism. Nearly 50 percent of the employers offering dependent (family) coverage report that the workers do not take coverage for their dependents because the dependents have coverage from somewhere else. Twenty-seven percent report their employees decline dependent coverage because they cannot afford the premiums. Many small employers that do not offer health benefits are potential purchasers. Twelve percent are either extremely or very likely to start offering health benefits in the next two years, and 17 percent are somewhat likely to start offering health benefits. A number of factors would increase the likelihood that a small business would seriously consider offering a health benefits plan. Two-thirds of small-business owners said they would seriously consider offering health benefits if the government provided assistance with premiums. Almost one-half would consider doing so if insurance costs fell 10 percent. In addition, one-half would be more likely to seriously consider offering a health benefits plan if employees demand it. Many small employers with health benefits have recently switched health plans, and 34 percent report that they did so within the past year. Affordability for the employer and the worker is clearly a critical factor affecting the likelihood of switching health plans. Nearly all employers who have switched health plans within the past five years cite cost as the main reason. One-third of companies offering health benefits think they will change coverage, and 5 percent think they would drop coverage if the cost of health insurance were to increase by 5 percent.