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November 20, 2007
Health Coverage Drops Among Small Employers

Health coverage prevalence among employers with fewer than 200 employees fell from 66 percent five years ago to 61 percent in 2007, according to a survey by Mercer. From 2006 to 2007 alone, the prevalence of health coverage among these employers dropped from 63 percent to 61 percent.

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This drop-off is continuing despite the new availability of relatively low-cost consumer-directed health plans (CDHPs). In 2007, the percentage of employees enrolled in a CDHP (based on either a Heath Savings Account or a Health Reimbursement Account) rose from 3 percent to 5 percent of all covered employees. 

Mercer found that just 7 percent of employers with fewer than 500 employees now offer a CDHP, up from 5 percent in 2006. Fourteen percent of all larger employers offer the plans, up from 11 percent last year. Forty-one percent of employers with 20,000 or more employees offer the plans in 2007, up from 37 percent in 2006. 

The lion's share of the CDHPs added in 2007 were based on HSAs, which don't require an employer contribution.

The survey found that 80 percent of large employers use health management programs as a way to control cost and improve productivity, while 52 percent are actively promoting employee consumerism.  The majority of employers using these strategies say they have been successful (63 percent for health management and 62 percent for consumerism).  Large employers, which tend to be more proactive in cost management, experienced a somewhat lower average cost increase than small employers in 2007 (5.1 percent compared to 6.6 percent).

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