Update on the State of Small Business Healthcare

In 2021, Gusto published data on the status of small business healthcare, showing the disparities between large and small businesses in offering healthcare coverage and the amount they contribute to related expenses (typically premiums, deductibles, and other out-of-pocket expenses). In 2022, Gusto released a set of recommended reforms that Congress should enact to increase coverage and affordability for employees of small businesses.  

Our current data, which includes 300,000 businesses nationwide, reveals that not much has changed in the last two years. Policy intervention is still needed to help small businesses remain competitive by either offering affordable small group healthcare or contributing to the cost of healthcare premiums, particularly when employees do not have group discounts and need to buy coverage from the Affordable Care Act (ACA) marketplace.  

Key Findings: 

• Large employers (50+ employees subject to the ACA mandate) are still over 5 times as likely to offer healthcare coverage than the smallest employers (1–9 employees). See Figure 1 below.
• There is currently greater parity in employer premium support for individuals and dependents between large and small companies, representing an improvement to the2021 data. See Table 1 below.
  

Surveys consistently show that cost is the biggest barrier for small businesses to offer healthcare to their employees, and Gusto has asked Congress to allow small employers who offer Affordable Care Act (ACA)-compliant plans to collect the premium tax credits their employees would have received in the marketplace. 

A second option is to reform Health Reimbursement Arrangements (HRAs) for small businesses. This would give business owners more flexibility to provide tax-free funds to employees while still supporting the individual marketplace and helping to make plans more affordable. This reform would mean all small business employer HRA contributions would be additive to premium tax credits that individuals receive in the ACA marketplace.

Implementing these reforms would be a catalyst for small business competitiveness, especially a still tight labor market, and ensure our nation’s job creators can continue to start and grow businesses. These reforms are also beneficial to the health and welfare of small business employees. 

Figure 1: Percentage of Employers That Provide Health Insurance to Their Full-Time Employees 

According to the Kaiser Family Foundation, only 32.5% of US companies with fewer than 50 employees offer health insurance. Gusto data is roughly in line with this figure, showing that 39.7% of companies with 50 or fewer employees offer health insurance.  

Table 1: Percentage of Employer Contribution Towards Employee Premiums

ER Size	ER Contribution to Individual Premium	ER Contribution to Dependent Premiums
1—9	75.67%	52.33%
10—24	74.04%	49.56%
25—49	77.05%	60.31%
50—99	79.09%	66.12%
100+	82.25%	72.47%

Gusto’s 2021 data showed that employers (ERs) with 1-9 employees only contributed 60.49% to an individual’s premium and 36.86% to dependent premiums. The 2023 data show a vast improvement in the smallest ERs contribution towards individual and dependent care premiums.