Many workers at small firms pay more for less health coverage

As workers across the country enroll in their 2025 health insurance plans, a new report from the Commonwealth Fund reveals that small-business employees face higher health insurance deductibles and premium costs compared to their counterparts at larger companies. And despite paying more, these workers receive coverage with less financial protection.

The report, Trends in Employer Health Insurance Costs, 2014–2023: Coverage Is More Expensive for Workers in Small Businesses, examines national trends and differences in the affordability and quality of employer-sponsored coverage for workers in small and large firms across all 50 states and the District of Columbia.

Small firms are defined as businesses with fewer than 50 employees, while large firms employ 50 or more. Smaller employers often face unique challenges, including higher administrative costs and reduced bargaining power with insurers. They are not required by law to offer health insurance.

Key findings include:

• Higher premium costs and deductibles: Small-firm employees pay more for their health plans than their counterparts at larger companies.

In 2023, small-business employees paid an average of $7,529 annually for their share of family premiums — $733 more than employees at larger firms.

In nearly all states, small-firm employees also face higher deductibles. In 2023, the average family plan deductible was $5,074, more than $1,500 higher than the $3,547 average for large-firm employees.

• State-level differences: Health insurance costs for workers vary across states by employer size, with family health plan premiums for employees at small firms in some states being nearly double those at large firms.

In Massachusetts, small-firm employees paid an average of $12,604 annually for family premiums in 2023, compared to $6,933 for workers at larger companies.

In 40 states and the District of Columbia, small-firm employees contributed a larger share of the premium for family coverage than their large-firm counterparts. For example, in Arkansas, small-firm workers contributed about 56 percent of their premiums, compared to around 27 percent for large-firm workers on average.

• Growing costs with less protection: Small-firm employees are paying more in up-front premium contributions, yet their plans continue to have high deductibles.

Every year since 2017, employees in small companies have spent more for their contributions toward premiums for family coverage than employees in large companies, reflecting growing cost and small firms’ need to share more of that cost with their workers.

Premium contributions for small-firm workers rose from an average of $5,413 in 2017 to $7,529 in 2023, compared to $5,190 for large-firm workers in 2017 and $6,796 in 2023.

The report highlights several options for alleviating the financial burden on small-business employees and ensuring equitable access to health coverage:

• Expand Medicaid access: Establish a federal fallback option for Medicaid-eligible workers in the 10 states that have not expanded the program. This would allow lower-income people with unaffordable employer plans to enroll in Medicaid in those states.

• Allow greater access to marketplace subsidies: Enable more small-firm employees with unaffordable or inadequate employer-sponsored health plans to qualify for subsidized marketplace coverage.

• Permanently extend enhanced marketplace premium tax credits: Make the enhanced subsidies introduced during the COVID pandemic permanent. These credits, which significantly reduce
consumers’ premium costs for marketplace plans, are set to expire at the end of 2025.

• Lower costs for small-firm workers: States could introduce measures to limit growth in premiums and cost sharing in fully insured employer plans.