Small Business Health Plan Premiums Have Increased by 5% Since 2015

May 01, 2019 - Average health insurance premiums and individual deductibles for small business health plans have both increased since 2015, which may contribute to employers and employees’ concerns about affording health coverage in the future, a study conducted by eHealthinsurance revealed.

The study found that average health insurance premiums for small business health plans, which are typically paid with both employer and employee contributions, decreased by two percent between 2017 and 2018. However, per-person monthly premiums have increased by five percent since 2015, rising from $390 in 2015 to $409 in 2018.

Average individual deductibles increased by 14 percent between 2017 and 2018, rising from $2754 to $3140 over this period. Since 2015, individual deductibles have increased by 24 percent.

However, the survey also showed that small business plans have lower average per-person costs than comparable plans in the individual market.

“Small business plans show significantly more premium stability than individually purchased coverage,” the report said.

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“While the average per-person premium for small business coverage increased only 5 percent between 2015 and 2018, individual premiums for those who buy their own coverage increased 54 percent in the same period (from $286 in 2015 to $440 in 2018).”

The team also conducted a survey of small business health insurance customers with fewer than 30 employees.

When asked why they provide health benefits to their employees, most business owners said offering health coverage provides a strategic advantage in hiring. Sixty-six percent of respondents offer benefits to help them hire and retain the best employees, while 43 percent said they feel morally obligated to offer benefits.

Twenty-seven percent said they offer benefits because it encourages productivity, and 26 percent said their employees couldn’t afford coverage on their own. Just 11 percent said they offer medical benefits for the tax benefits available to them.

The survey also showed that most employers are satisfied with their health benefits options.

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“More than 8 in 10 small businesses are happy with their coverage,” the report stated.

“Fifty-five percent of respondents say they are ‘very happy’ with their small business health plan, while an additional 32 percent say they are ‘somewhat happy’; four percent say they are ‘somewhat unhappy’ while three percent say they are ‘very unhappy.’”

Affordable monthly premiums and out-of-pocket costs are the main driver of coverage choices, with 34 percent of business owners reporting that they choose health plans primarily because of affordable premiums.

Thirty percent said they chose plans based on affordable copays and deductibles, while 11 percent said they chose based on premiums their employees could afford. Ten percent said that strong networks of providers are a top consideration when choosing a health plan.

Most small business owners believe they offer competitive or superior plan benefits. Forty-three percent said they are confident that the health plan they offer is competitive with that of similar employers. Seventeen percent said they believe they offer better coverage than most similar employers, while 14 percent said they believe their employees could easily find better coverage with comparable employers.

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Additionally, most employers don’t believe that their health plans have impeded their ability to reward and hire workers.

Fifty-three percent of employers said that offering benefits has not impacted their ability to give out raises or to hire more employees, while 30 percent said offering medical benefits has made these things harder.

The results also showed that many small business owners offer additional benefits, with 52 percent saying they offer dental coverage, 41 percent offering vision insurance, and 24 percent offering a 401(k) plan.

However, many employers said they worry about affording health coverage in the future. Forty-one percent said they were “very concerned,” 42 percent were “somewhat concerned,” and just 17 percent said they were not concerned.

“Moderate increases in premiums could cause most small businesses to drop coverage. Sixty-three percent say an increase of 15 percent or less in monthly premiums will make their current plan unaffordable,” the report said.

Employees are also worried about their ability to afford premiums and deductibles, with 39 percent saying they were “very concerned” and 38 percent saying they were “somewhat concerned.”

“Unexpected costs are among employees’ greatest concerns,” the report said.

“Sixty-seven percent of small business owners say their employees’ greatest concern is the cost of medical emergencies; 39 percent cite the cost of prescription drugs; 34 percent cite the cost of regular doctor visits; 32 percent cite the cost of planned surgeries or other procedures.”

The results show that while small business health plans have lower per-person rates than coverage in the individual market, many employers and employees are still concerned about rising insurance costs. If coverage prices continue to rise, small businesses may have to make difficult decisions about the benefits they offer.