A new report by Gusto suggests it’s in the best interest of most small businesses to offer their employees’ health insurance. The benefits of offering health insurance are profound, from lower turnover to higher productivity. However, steadily rising premium costs are putting this seemingly no-brainer decision out of reach for many small business owners.
According to the report, a large minority of all small businesses (40%) offer health insurance to their employees. Among small businesses that offer other benefits, however, 57% offer health insurance as well. Health insurance also differs greatly by business size. Around two thirds of businesses with over 10 employees reported offering health insurance, while just 25% of employers with 1-5 employees do. It’s important to note, however, that half of employers with 1-5 employees do offer benefits.
Small businesses that offer health insurance are rewarded for it. First, it makes hiring easier: Small businesses that offer health insurance are 13% more likely to say they didn’t have issues finding employees in 2024. Employees also seem to perform better when given health insurance. Small business owners who offer health insurance are 25% more likely to say that their employees have exceeded expectations. The report’s authors suggest that health insurance boosts employee morale and productivity because it shows that the business is committed to their workers’ wellbeing and financial security.
The data suggests that employees are right to feel that businesses that offer health insurance care more about them. According to the report, nearly 80% of small businesses that offered health insurance as part of their first benefit package did so because it was personally important to them. Business owners offering their employees’ health insurance were also 10% more likely to cite a personal desire to offer benefits than businesses that offer benefits other than health insurance.
Despite the numerous benefits associated with offering health insurance, high premium costs make it difficult for many small business owners to do so. Health insurance premiums for employers have increased an average of 3.5 annually since 2018. That’s probably why three quarters of the report’s respondents who offer health insurance said they’d like the next administration to address health insurance premiums.