Job-Based Health Insurance Buffeted by Recession, Obamacare

Health insurance costs aren’t going up as much as they previously were, but fewer employers are offering group coverage

April 24, 2015
Piggy bank and stethoscope denote health insurance costs rising.

Photo: scpr.org

Still offering health insurance coverage to employees? The majority of businesses, including small ones, continue to do so. But the percentage is declining. The most recent study by the California HealthCare Foundation, shows a long-term decline in the percentage of employers in that state offering coverage: from 69 percent in 2000 to 58 percent currently. In another study, as reported by CNBC, the Robert Wood Johnson Foundation analyzed the period 2009 to 2013 and found that the recession had accelerated the trend whereby fewer businesses were offering employees group health insurance. The report, drawing on national numbers, “largely blames the deep recession that began in 2008 for speeding up the decline of covered workers.” By how much? Job-based coverage shrank from 53.7 percent among private-sector workers in 2009 to 49.7 percent in 2013. Also commenting on the Robert Wood Johnson report, Sarah Ferris, in The Hill, pointed to its findings that as of 2013, fewer than half of private workers in the U.S. could buy health insurance through their jobs, down from 55.7 percent in 2005. “The trend was apparent in nearly every state,” she writes. All but 15 states saw “significant declines” in the share of employers offering insurance.

With that trend as background, the debate on Obamacare began. Critics charged that the legislation would cause many businesses to drop group health insurance plans and send employees off on their own to find insurance; that it would also cause larger companies (those with more than 50 employees) to reclassify workers as part-time staff to avoid having to include them in a mandated company-offered group health insurance policy.

But a story this fall in The Washington Post finds that after two years of Obamacare and its private insurance exchanges, including small-business marketplaces known as SHOPs, such predictions largely did not pan out. “The Affordable Care Act so far has not prompted the nation’s employers to drop health benefits for some or all of their workers,” wrote Amy Goldstein in that newspaper. Pointing to a survey of more than 3,000 employers by the Employee Benefit Research Institute and the Society for Human Resource Management, she notes that “one in 12 employers said they are eliminating coverage for workers’ spouses, while 1 in 76 said they are dropping insurance for part-time employees.”

One factor offering some relief from the long-term trend of employers eliminating group health insurance—the core of any serious benefits program—is the fact that health care costs, which have been going up at double-digit rates in some years past, averaging 7 percent over the past 15 years—are no longer growing at that same pace. The average annual cost of health benefits for an employee this year is about $11,000 and the cost next year will increase by 4.6 percent.

A report by management consulting firm Towers Watson says that cost increases in health benefit programs are at “historically low levels,” and notes that employers surveyed expect to see an average increase in their health care costs of 4 percent in 2015, compared with 4.5 percent in 2014, but still double the current rate of inflation.

The Georgetown University Health Policy Institute, citing a Kaiser study, says that “despite concerns that the Affordable Care Act’s reforms would undermine employer-sponsored health insurance, a recent study by the Kaiser Family Foundation finds that employer coverage remains steady and premiums have increased only modestly. While this is welcome news, long-term trends that show decreasing employer coverage—and increasing costs for those that are covered—highlight the need to strengthen all pillars of coverage, including Medicaid, CHIP, and the ACA’s state health insurance marketplaces and premium tax credits.”

Meanwhile, Abby Rosenberger on the ZaneBenefits HR blog points out, citing an Associated Press story, that some small employers are dropping health care plans and are instead subsidizing employees who pay for individual coverage. “The cost of group health insurance is becoming unsustainable for small-business owners,” she writes, though “dropping health care benefits altogether is not a feasible option for most small employers, as offering health care is a crucial part of employee recruiting and retention.”

Many employers, including many home improvement companies, are now in hiring mode and find that “bennies,” that is, benefits—but most especially health insurance—are a make-or-break when it comes to bringing onboard qualified job candidates. PR

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