Microbusinesses struggle to offer healthcare benefits

Businesses with five or fewer employees, called microbusinesses, are at the biggest disadvantage when it comes to offering health insurance benefits to employees, according to research from the Sam’s Club/ Gallup Microbusiness Tracker.

The increasing cost of healthcare, especially for small businesses, makes it hard for microbusiness owners to compete for employees with larger businesses that can offer more robust benefits.

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“Health insurance coverage is expensive for most in the U.S., but per-person costs can be brought down significantly with the group insurance plans that most large employers negotiate,” says Ben Ryan, a research consultant with the Sam’s Club/ Gallup Microbusiness Tracker. “However, microbusinesses have the least financial and organizational resources of any business to begin with, and can't benefit from the economies of scale of larger businesses' health plans.”

Though microbusinesses are not legally required to offer health insurance benefits under the Affordable Care Act, owners say it is nearly impossible to attract top-tier talent without it. Only 21% of microbusinesses with at least one employee provide health insurance benefits.

Nearly 45% of microbusiness owners who don’t offer healthcare benefits say finding qualified employees is a major issue. Even 35% of microbusinesses that offer healthcare insurance say finding good employees is a problem. More than half of microbusiness owners that already provide health benefits say that continuing to offer those benefits is a major issue.

Not only do microbusiness owners struggle to provide employees with benefits, they also have difficulty buying health insurance for themselves. Only 31% of microbusiness owners provide their own health insurance. Thirty percent rely on a current or former employer for health insurance. Nearly 20% rely on Medicaid for healthcare benefits.  

“Perhaps more than any other metric, covering at least the owner's health coverage appears to be an important milestone for these smallest of businesses in becoming self-sufficient enterprises with the ability to grow,” says Ryan.

The survey was conducted in September with 1,005 microbusiness owners.