A recent survey by the National Federation of Independent Business (NFIB) has highlighted the concerning issue of small businesses struggling with the cost of providing health insurance for their employees. The findings indicate that small business owners are currently grappling with a significant affordability crisis.

Managing the expenses associated with offering employer-sponsored health insurance has proven to be quite challenging for most owners, and alarmingly, nearly half of them have had to accept reduced profits or even borne losses to cover the increased premiums over the past five years.

Holly Wade, Executive Director of NFIB’s Research Center, acknowledged that health insurance poses an ongoing difficulty for small business owners. She highlighted that health insurance costs are the primary obstacle faced by employers both offering and not offering health coverage.

Small employers actively contend for skilled individuals to fill job vacancies and recognize the significance of health insurance as a valuable benefit for employees and prospective job seekers.

Employer-Sponsored Health Insurance:

More than half (56%) of small employers stated that they presently provide health insurance to their employees, while 44% do not. Companies with a higher number of employees were significantly more inclined to offer health insurance, as 89% of firms with 30 or more employees currently provide health insurance compared to only 39% of those with 1-9 employees.

Nearly all (93%) of the individuals currently providing health insurance provide group health insurance.

Out of the companies providing group health insurance, 44% have been providing this benefit since they first started their operations. Eleven percent began offering health insurance within the initial year, while 8% started providing it within the first 2-3 years.

Only 88% of small companies provide health insurance exclusively to their full-time staff, while merely 10% extend coverage to both full-time and part-time employees. Additionally, a mere 1% of small employers offer health insurance exclusively to part-time workers.

Out of the employers who provide health insurance, 37% have a majority of their employees enrolled in a High Deductible Preferred Provider Organization (PPO) plan. Meanwhile, 25% have most of their employees covered by a Health Maintenance Organization (HMO) plan, and an additional 9% have most of their employees enrolled in a Point of Service (POS) plan.

Fourteen percent reported having a different type of plan, and 17% were unsure. It is worth noting that 80% of companies offering health insurance do not have a secondary health plan.

Of the small employers surveyed, approximately 77% stated that they have a Fully Insured Plan when inquired about their group health plan being either Fully Insured or Self Insured.

Less than a quarter of eligible employees are enrolled in the health insurance plan of 15% of small employers. Additionally, 13% reported a quarter to just under half of their eligible employees enrolled, while 19% had between half to 60% enrolled. Seventeen percent reported a 70% to 89% enrollment rate, and 10% of small employers reported a 90% to 99% enrollment rate.

Non-offering Employers:

The primary factor that prevents small employers from offering health insurance is its high cost, as stated by 65% of them. Among companies with 30 or more employees, the majority (88%) also identified expense as the key reason for not providing health insurance. In comparison, firms with 1-9 employees (63%) and 10-29 employees (70%) reported this as their main rationale.

Of all firms, 9% stated that the main reason for not offering health insurance is due to their employees having access to affordable coverage in the government exchange marketplace or other government programs. Meanwhile, 7% mentioned that a significant number of their employees are part-time, seasonal, or have high turnover.

Additionally, 2% cited the reason for not providing health insurance as uncertain revenue, and an additional 1% expressed that the administrative burden is too overwhelming.

Of the small employers who do not currently provide health insurance to their employees, 42% have no plans to offer it in the future. Nearly half (47%) are uncertain. Among those who do plan to offer health insurance, 36% stated that having more affordable options would motivate them to provide coverage.

Additionally, 19% said they would if their business became more profitable, 13% mentioned employees showing interest in the benefit, and another 7% highlighted reduced employee turnover as a factor.

Reasons for Offering Health Insurance:

A majority of employers, comprising 63%, recognize the significance of providing health insurance to attract and retain employees, considering it either highly important or moderately important. Additionally, 15% of employers regard it as mildly important.

The importance of offering health insurance for recruitment and retention purposes amplifies with the increase in the size of the organization. Specifically, 29% of firms with 1-9 employees reported it as highly important, while slightly over half, or 53%, of firms with 10-29 employees held the same perception. Moreover, an overwhelming 72% of firms with 30 or more employees deemed it highly important.

Of the employers who provide and do not provide health insurance, 94% of those who currently offer health insurance consider it important to some extent, whereas only 58% of those who do not currently offer health insurance share the same belief.


The usual procedure for many small business owners is to obtain health insurance through an agent. According to statistics, 88% of small employers opted to either purchase or renew their employer-sponsored health insurance with the assistance of an agent or broker.

More than one third (36%) of small employers procure additional business insurance or products from the same broker or agent. A significant majority (64%) of employers have maintained a longstanding relationship with the broker or agent they rely on to acquire or renew their existing employer-sponsored health insurance for over five years.

Out of the small employers surveyed, 82% discussed options or alternatives to their existing health insurance plan with their broker or agent. Among those who had this conversation, more than half (63%) stated that their broker or agent suggested alternative plans.


A total of 72% of small employers lacked any familiarity with the Individual Coverage Health Reimbursement Arrangement (ICHRA), and slightly more than half (52%) stated that their broker or agent did not bring up this alternative.

Affordable Care Act/Regulations:

Of all the small employers surveyed, 38% reported that the Affordable Care Act (ACA) had affected their business. On the other hand, 60% stated that they had not been impacted, while 2% were uncertain about the ACA’s effects.

In terms of specific impacts, 12% mentioned that they were obliged to start providing health insurance to meet the mandate. Another 8% altered or enhanced their coverage to align with the mandate’s criteria. Additionally, 6% reduced their employee count to avoid falling under the mandate’s requirements.

Nearly all (94%) of small employers have not encountered any penalty notices or penalties imposed by the IRS for violating the employer mandate.

Personal Health Insurance:

Out of all small business owners, 94% possess personal health insurance. Among those who have personal health insurance, 38% obtain it via their business, 19% acquire it from the individual market, and 11% receive it through their spouse’s employer.

Of the respondents, 18% acquire their personal health insurance via Medicare, Medicaid, and/or Tricare. Two percent mentioned different sources, none indicated short-term plans, and 13% expressed uncertainty.

Of the small business owners who made purchases in the individual market, 30% opted for the government exchange marketplace, while 38% obtained their insurance from a health insurance broker, and 30% purchased it directly from an insurance company.


Out of the small employers surveyed, a total of 79% expressed their interest in joining an association health plan to some extent. Of this percentage, 12% confirmed their definite intention to join, 23% indicated a high likelihood of joining, and 44% stated that they would contemplate the possibility of joining.

Over the past year, approximately 27% of small employers have engaged in conversations with fellow small business owners regarding employer-sponsored health insurance. The primary focus of these discussions, as stated by 78% of respondents, was the cost of health insurance.

Reasons to Purchase Group Coverage

In addition to providing affordable health services, group coverage also assists businesses in terms of employee retention and tax advantages. In the subsequent sections, we present the primary ways in which buying a group policy can be advantageous for you, your business, and your employees.

Improved access to healthcare

Individuals with health coverage are at an advantageous state as they are more likely to attain medical assistance, encompassing preventive measures that can potentially prevent the occurrence of severe health issues in the future. The possession of health coverage motivates individuals to actively uphold their well-being and enhances their accessibility to services that could otherwise be financially out of reach.

Keeping expenses under control and ensuring financial stability.

In addition to the improved access to care, health coverage guarantees that individuals can manage the costs associated with medical services. It provides financial protection for those with health coverage against overwhelming debts resulting from severe illnesses or injuries.

Given that the necessity for medical services often arises unexpectedly, the costs typically surpass what the majority of individuals can afford or are willing to pay.

Your Business Can Benefit from Tax Incentives.

In general, any costs incurred by an employer in relation to health insurance, whether for employees or dependents, can be fully deducted as ordinary business expenses on state and federal income taxes. However, tax implications become slightly more complex beyond this general rule. By implementing a few simple administrative procedures, you can help your employees save on taxes.

It is possible for an employee to make contributions towards the cost of their health insurance before taxes are calculated and deducted, resulting in an increase in their take-home pay and a decrease in their taxable income.

Small businesses can benefit from healthcare tax credits under the Affordable Care Act, which employers should consider to alleviate the expenses associated with insurance.

Since the 2010 tax year, the option to receive small business healthcare tax credits has been provided. In order to be eligible for a tax credit of up to 50% of premium expenses for two consecutive years, small business proprietors must contribute at least 50% towards their employees’ healthcare premiums, while also employing 25 or fewer full-time equivalent workers who earn an average annual salary of $50,000 or less.

Improved employee recruitment and retention

Businesses that provide group medical coverage assert that there are numerous benefits associated with offering such an option. The possession of group medical coverage has the potential to:

  • Lower your hiring costs. Looking for, hiring and training new employees takes time and costs money. Having insurance helps you to recruit and retain talented employees.
  • Reduce absenteeism and decrease risks associated with poor health in the long run. When employees don’t have health insurance, they wait longer to seek treatment, which can lead to the need to stay home from work or go out on disability. Healthy employees are less likely to injure themselves and more likely to do their jobs well.
  • Enhance your office atmosphere and improve morale. Employees tend to be happier and more satisfied with their jobs when they are offered group insurance. Some small employers indicate that their employees will accept slightly lower wages if those wages come with health insurance. In addition, employees can benefit tax-wise and convenience-wise by paying premiums right from their paychecks.
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