Small Businesses' Decisions to Offer Health Insurance to Employees

Employer-sponsored health insurance (ESI) is the dominant source of coverage for nonelderly adults in the United States. Virtually all businesses with 200 or more workers offer coverage to at least some of their employees, whereas many small businesses do not offer it to any. An important reason employers say they offer coverage is so they can recruit and retain workers with the desired skills and experience; the most common reason for not offering it is the cost. Some small businesses also do not offer coverage because they think their employees do not need or want it, perhaps because the employees obtain better (or less expensive) ESI through their spouses or do not feel compelled to carry health insurance at all, especially at the going price.