It's getting harder for small businesses to offer health coverage

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Myles Ma, CPFCSenior ReporterMyles Ma, CPFC, is a senior reporter and certified personal finance counselor at Policygenius, where he covers insurance and personal finance. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

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Small businesses are less likely than ever to offer health insurance.

Only 50% of of businesses with 3 to 49 workers offered health benefits in 2017, according to the to the Kaiser Family Foundation 2017 Employer Health Benefits Survey, released Tuesday.

The likelihood of a worker receiving health benefits depends largely on the size of their company. Almost every company with more than 100 employees offers health coverage, the survey said.

The share of firms with 3 to 49 workers offering health insurance is at its lowest level since Kaiser began conducting its survey in 1999. It’s steadily declined from a high of 66% reached in 2010 to today’s 50%.

Every company with at least 50 full-time employees must offer health coverage under the Affordable Care Act. Employer-sponsored insurance is the main source of health coverage in the United States, covering about 151 million people - around half the non-elderly population.

Because small companies make up most of the firms in the U.S., the decline in offering health benefits has led to on overall drop in employer coverage rates. Only 53% of all firms offered health coverage in 2017, down from 56% last year and 61% in 2012, the survey said.

Small businesses can’t afford insurance

Of the small businesses that don’t offer health coverage, many (44%) said the high costs were the most important reason. Others (17%) said their businesses were too small to offer coverage.

Very few (2%) said they didn’t offer coverage because they thought their workers could get a better deal on the ACA health insurance exchanges. However, about 16% give their workers money to buy insurance through the individual market.

Those workers who do have health coverage have been lucky to see relatively modest increases in premiums over the past six years, the survey said. Annual family premiums for employer-sponsored coverage rose an average of 3% to $18,764 in 2017, in contrast to the larger increases we’ve seen on the individual market.

“While the marketplaces seem to get all the attention, the much larger employer market where more than 150 million people get their coverage is very stable,” said Drew Altman, CEO and president of the Kaiser Family Foundation.

Costs still rising for workers

However, this year’s increase is still higher than the rise in worker’s wages (2.3%) and inflation (2%), so health expenses are still outpacing what workers take home. At the same time, workers are paying an increasing share of their premiums.

In 2017, families paid 31% of their premium on average while individuals paid 18%. The 31% share is the highest since Kaiser started the survey in 1999.

Deductibles have also increased in recent years, partially due to higher enrollment in high-deductible health plans with savings options like health savings accounts. While these plans seem like they’d increase out-of-pocket costs for workers, many employers give account contributions that reduce these costs.

Kaiser conducted its survey by calling 2,137 randomly selected employers with at least three workers. National Research, LLC conducted the survey from January through June.

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