More Employers Offered Health Benefits In 2020, EBRI Says

Employer-sponsored disability insurance is proving to be a popular benefit.

By Susan Rupe

Despite predictions to the contrary, employers did not drop health benefits en masse after the Affordable Care Act took effect, the Employee Benefit Research Institute found.

EBRI released a study finding that the percentage of private-sector employers offering health benefits increased. In 2016, 45.3% of private-sector employers offered health benefits. By 2020, the percentage of private-sector employers offering health benefits reached 51.1%.

“A Buffeted Employer Health Care System Continues to Hold Firm: What Could Change That?” also finds that 80.5% of workers employed by private-sector employers were eligible for health benefits, up from 75.4% in 2014 — continuing a five-year trend.

Despite this increase in employers offering health benefits, the employment-based health benefits system still faces threats, the EBRI report said. A combination of a recession, higher unemployment, the Biden Health Care Plan, and the availability of health reimbursement arrangements that workers can use to purchase health benefits through the non-group market could test the resilience of the employment-based health benefits system.

The study also provides insights into differences in health coverage availability among small versus large employers and shifts in employment trends that may be contributing to eligibility increases.

Data cited in the study came come from the Medical Expenditure Panel Survey - Insurance Component, and shows

Since 2013, the percentage of employers with 1,000 or more employees offering health benefits to workers has been consistently near or above 99%.

However, smaller establishments have shown a steady decline in offer rates. For the smallest employers studied, those with fewer than 10 employees, the offer rate declined from 28% in 2013 to 22.3% in 2020.

In 2017, the overall percentage of private-sector employers offering health benefits increased for the first time in nearly a decade. In 2008, 56.4% of private-sector employers offered health benefits. By 2016, it was down to 45.3%. It then increased to 51.1% in 2020.

The percentage of workers eligible for health coverage through their job also continued its upward trend. Between 2014 and 2020, the percentage of workers eligible for health coverage increased from 75.4% to 80.5%. This increase was likely due to changes in the composition of the work force. EBRI found a shift to full-time employment, more workers employed in firms with union employees, fewer workers considered low wage, and a shift to larger firms.

The finding that in 2020 the percentage of private-sector employers offering coverage and the percentage of workers eligible for such coverage increased might be surprising given the impact that the COVID-19 pandemic had on the economy and the labor market, EBRI said. It is important to note several factors that would explain the 2020 findings.

First, an employer's decision to offer health benefits in 2020 was made in 2019, before the COVID-19 pandemic. Low unemployment rates at the time were perhaps a major factor influencing whether an employer would continue to offer health benefits. Second, when the COVID-19 pandemic hit the United States, many employers chose to furlough workers. This resulted in a large increase in the unemployment rate, but many of these workers were able to maintain their health benefits. Third, findings from 2020 may be influenced by when in 2020 an employer responded to the survey. Fourth, findings may also suffer from a selection bias. Firms that shut down because of the COVID-19 pandemic, forcing their workers to lose health benefits, may not have responded to the survey.

Why Might More Workers Be Eligible for Health Coverage?

EBRI found that the percentage of workers eligible for health benefits continued a longer-term trend. While increasing offer rates is one reason why more workers are eligible for coverage, EBRI also found that workers have been migrating to jobs that are more likely to offer health coverage.

A long-term shift to full-time employment, fewer workers considered low wage, and a shorter-term shift to larger firms were among the trends EBRI found. The percentage of employers reporting that 75% or more of their workers were employed full time increased from 63% to 70% between 2014 and 2020. Similarly, the percentage of workers in firms with low-wage workers comprising at least 50% of the work force fell from 29% in 2013 to 19% in 2020. And, more recently, the percentage of workers employed in large establishments (those with 1,000 or more employees) increased from 46% to 51% between 2016 and 2020.

Full-time workers are more likely than those employed part time to be offered health benefits. Similarly, larger firms are more likely than smaller firms to offer health benefits. These shifts, along with others, are not large, but they are large enough to result in an increased percentage of workers who are eligible for health benefits through their job.

The Potential Impact Of The Biden Health Care Plan

During the campaign leading up to the 2020 presidential election, President Biden proposed policy changes that would create incentives for workers to drop employment-based health coverage for ACA exchange coverage or for employers to stop offering traditional employment-based health benefits. The Biden Health Care Plan includes three provisions that would make it easier for workers and employers to move away from employment-based health coverage:

Increasing the ACA’s premium subsidies and expanding subsidy eligibility.
A “public option” health plan.
A Medicare “buy-in” program for 60- to 64-year-olds.

A public option health plan would give ACA exchange enrollees a new, potentially less costly health plan option. To the degree these plans are successfully able to negotiate lower provider reimbursement rates, premiums would be lower. EBRI said this would put pressure on private health plans offering coverage through exchanges to also find ways to lower premiums in order to remain competitive.

The EBRI study concluded that if the public option is successful in reducing premiums while maintaining the generosity of coverage, employers may find it more attractive to drop coverage so that their employees could only get coverage through exchanges. In addition, even if employers did not drop coverage, workers may find the lower premium plan, combined with more generous subsidies, to be more attractive than their employment-based coverage options.

Although there are many reasons to expect employers to move away from offering health benefits, there are also reasons to expect employers to continue offering them, EBRI said.

Large employers may continue to sponsor their own health plans because of the concern that employees and their dependents may be impacted by continued volatility in both choice and premiums in the non-group market. Employers may also be hesitant to move away from offering coverage because of the uncertainty of the future of ACA and what that might mean for the availability of non-group coverage. Employers may continue to offer benefits because they need healthy employees and may think that they can do a better job of investing in worker health than either the non-group market or the government.

Finally, employers may be hesitant to move away from offering health coverage simply because of the strong economy and lower unemployment rates, which make it hard to drop such a benefit in an environment where it is challenging to recruit and retain workers.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.