How Employer-Sponsored Health Insurance Differs at Big and Small Businesses

Posted By Scott Shane On December 29, 2014 @ 8:00 am In Employment

Many people are aware that big companies are much more likely than small businesses to offer employer-sponsored health insurance to their employees. The Medical Expenditure Panel Survey ^[1] (MEPS), an annual effort to query nearly 40,000 establishments, conducted by the Federal Government’s Agency for Healthcare Research and Quality shows that only 34.8 percent of private sector establishments with fewer than 50 employees provided workers with health care coverage in 2013, as compared with 95.7 percent of those with 50 or more workers.

Bigger companies are also more likely than smaller ones to offer health care coverage to retirees. The 2013 MEPS reveals that only 1.3 percent of business locations with fewer than 50 workers offered health insurance to retirees under the age of 65, and only 2.3 percent offered it to older retirees. By contrast, 23.5 percent of private sector establishments with 50 or more workers provided health insurance to retirees under the age of 65, and 19.5 percent offered it to retirees over 65.

Similar patterns are present with part-time workers. As the most recent MEPS shows, 21 percent of part-time employees at business locations with fewer than 50 workers that provided health care coverage were eligible for that coverage, as compared to 32 percent of private sector establishments with 50-plus employees.

But establishment size doesn’t just affect the provision of employee health insurance, it also affects the characteristics of that insurance.

• Self-insurance is more common at larger business establishments. The MEPS shows that only 13.2 percent of places of business with fewer than 50 workers insured themselves in 2013, as compared with 64.6 percent of those with more than 49 employees.

• Multiple plan offerings are more common at larger establishments. According to the MEPS, only 20.2 percent of business locations with fewer than 50 employees offered more than one health insurance option to their workers. But 68.9 percent of private sector establishments with 50 or more people on the payroll did so.

• Waiting periods are more common at larger establishments. In 2013, 86.1 percent of business locations with at least 50 workers had a waiting period before new hires were eligible for health care coverage, the MEPS shows. Only 62.7 percent of places of business with under 50 employees had this delay.

• Individual premiums are slightly higher in smaller establishments, but family premiums are lower. In 2013, the average individual premium at a place of business with fewer than 50 people on the payroll was $5,628, as compared with $5,556 at business locations with at least 50 people employed, the MEPS reveals. By contrast, the average family premium was $14,787 at the smaller-sized establishments and $16,224 at the larger-sized ones.

• Co-pays and coinsurance are higher in smaller establishment plans. As the MEPS shows, 70.6 percent of business locations with fewer than 50 employees had a co-pay for a physician’s office visit, versus 63.6 percent of private sector establishments with at least 50 people on the payroll. Moreover, the average co-pay was larger at the smaller places of business, $26.75, as compared to $23.77 in 2013. Coinsurance costs were also slightly higher at smaller establishments. The average coinsurance rate in plans that required coinsurance was 21.3 percent at places of business with fewer than 50 people on the payroll, as compared to 18.9 percent at those with at least 50 workers.

In short, smaller establishments are less likely than their bigger counterparts to offer health insurance to their full and part-time workers and retirees. They are also less likely to self-insure, to offer multiple insurance plans, or make new hires wait before they are eligible for coverage. Small establishments’ individual premiums are slightly higher, and their family premiums are slightly lower, than those of large establishments; and their co-pays and coinsurance rates are larger.