Report reveals why small businesses don't offer health insurance benefits

By Maryalene LaPonsie on July 23rd, 2013

Workers may prefer to buy insurance through their employers, but more than half of small firms do not offer their workers these benefits.

Industry group LIMRA has issued a report outlining small business benefits and suggesting a way in which these companies can make more insurance options available to their workers.

"With the cost of benefits rising steadily over the past two decades, it is not surprising that many small business owners have made the decision not to offer employee benefits," said Kimberly Landry, research analyst for LIMRA Insurance Research, in a written statement. "What our study found was that few small businesses considered making voluntary benefits available to their employees, which provide employees the ability to obtain the coverage they need at little to no cost to the business."

Reasons companies don't offer insurance benefits

According to the LIMRA report, cost is the number one reason small businesses -- those with between 2 and 99 employees -- decline to offer insurance benefits. Other reasons include the size of their group and business priorities.

The following responses were most frequently given by small businesses when asked why they decline to offer insurance benefits:

  • Cannot afford benefits: 65 percent
  • Not enough employees: 40 percent
  • Employees get benefits elsewhere: 24 percent
  • Mandated coverage too expensive: 15 percent
  • Cannot qualify for a group policy: 15 percent
  • Employees prefer higher take home pay to insurance: 14 percent
  • Business has other priorities: 12 percent
  • Owner does not need benefits: 11 percent

Voluntary benefits may be the answer

Small businesses may not think they can afford to offer insurance benefits to their employees, but LIMRA notes voluntary benefits are an inexpensive way to provide employees access to additional insurance coverage. Voluntary benefits are plans offered in the workplace, but for which employees are responsible for paying the premiums.

The State of Voluntary Benefits report issued by Prudential in March 2013 found the following types of voluntary insurance benefits were most popular among surveyed employees:

  • Dental insurance: 65 percent
  • Life insurance: 61 percent
  • Vision insurance: 53 percent
  • Disability insurance: 50 percent
  • Accidental death & disability insurance: 38 percent
  • Long term care insurance: 22 percent
  • Accident insurance: 20 percent
  • Critical illness insurance: 12 percent

Employees purchasing products, such as term life, through a voluntary benefits program may have to pay the entire premium themselves, but the cost is typically less expensive than individual plans.

Unfortunately, LIMRA says 60 percent of small businesses are unfamiliar voluntary benefits. Until more companies begin to offer these workplace insurance benefits, individuals may want to compare life insurance rates online to find affordable coverage for their family.

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