House Plans: Medical Insurance Providers

Medical Insurance Providers

The news for small businesses — not particularly surprising and not particularly good — in the Kaiser Family Foundation’s latest study of employer-sponsored health insurance is that the trend lines are unchanged. Costs continue to go up, and the number of companies offering insurance does not.

While across all employers, premiums for family coverage grew at the modest rate of 4 percent over the last year, small businesses faced an increase double that — the biggest annual increase in family plans since 2004. For individual coverage, small-company premiums increased 5 percent, which was also more than the increase in the broader market.

Some small-business owners have reported paying a larger share of employee insurance premiums as those costs have gone up, but that has barely registered on the Kaiser survey, which is conducted every year. This year, small companies (with fewer than 200 employees) paid 84 percent of premiums for individual coverage — more than large companies typically pay — and 35 percent for family coverage, a smaller share than at big companies.

But small employers are continuing to try to keep cost down in other ways. For example, they are still migrating to the cheapest plans. These are the high-deductible plans, often coupled with a savings arrangement, that are popular among conservative economists and policymakers. Increasingly, they are popular among small businesses, too. Since 2006, and especially since 2010, they have grown to cover nearly a quarter of all small-business employees, eclipsing every other kind of plan except so-called “preferred provider” coverage. (High-deductible plans are even more popular at large companies.) Deductibles are in fact rising for most employees — nearly half of covered employees at small companies in individual plans have a deductible above $1,000, and just over a quarter pay more than $2,000.

Despite all this, slightly more small companies — 61 percent — are offering health insurance this year, but that figure has been fairly stable since 2004. The small-business health care tax credit in the Affordable Care Act was meant to bolster that figure by inducing companies with the smallest and poorest-paid workforces to buy health insurance. (The credit is fully available to businesses with 10 or fewer employees with average wages below $25,000.) But it appears not to have moved the needle much. Health insurance coverage from companies with fewer than 10 employees suddenly spiked in 2010, for reasons that Kaiser couldn’t explain, but fell back in 2011 and holds steady in the latest survey. A similar bounce occurred among companies (of any size) with a preponderance of low-wage workers, but the subsequent decline was sharper — just 29 percent of those companies offer insurance now, a third fewer than did in 2008 and 2009.

Indeed, it may prove difficult to associate many of the findings in the Kaiser study with the Affordable Care Act. The changes made by the law that have already taken effect mostly took effect in 2010. In fact, Kaiser’s 2011 survey reported average premium increases between 8 and 9 percent over the 2010 coverage, the largest annual changes since 2005, although that study took care not to identify causes for them.

The big changes will come in 2014 (if the law isn’t repealed first). And there is one thing the new study tells us about those changes: more small businesses will be affected by them. In 2011, 72 percent of small companies offering insurance indicated that they had at least one health plan that was deemed “grandfathered” — that is, an existing plan that would not have to meet the law’s new standards. (Remember the promise the law’s advocates made that “if you like your plan, you can keep it”? This is what they were talking about.) This year, that share has fallen to 58 percent, and the proportion of small-company employees enrolled in a grandfathered plan has dropped, too, from 63 percent to 54 percent.