Small businesses have dropped healthcare coverage over the last three decades

The percentage of small companies offering health insurance declined dramatically over the last three decades as care costs jumped and other options emerged. However, some employers want to provide it despite the expense because they say the benefit makes attracting and retaining employers easier.

The percentage of employers with 25 to 99 workers offering healthcare fell to 77% in 2023 from 81% in 1996, according to the Employee Benefit Research Institute (EBRI).

It decreased to 52% from 65% among employers with 10 to 24 employees, and to 23% from 34% among employers with fewer than 10 employees.

The decline in coverage among small employers accounts for the overall drop in employers offering the benefit, the survey found. The percentage of the nonelderly population with employment-based health benefits was roughly 70% from 1970 to 1989. By 2023, that dropped to 60%

Employer spending on healthcare is expected to surge 8% next year, the highest increase in nearly a decade, the Business Group on Health reported. Employer healthcare costs “have grown a cumulative 50% since 2017.”

The passage of the Affordable Care Act in 2010 gave new options for purchasing healthcare, and that permitted employers to stop offering plans as part of their benefits packages, said Paul Fronstin, director of health benefits research at EBRI.

“We have options we didn’t have before. You could go to the ACA exchange if your employer doesn’t offer coverage and get coverage,” Fronstin said. “Small employers may say, ‘I don’t need to do this anymore.’”

However, Nich Tremper, senior economist at Gusto, said that many small employers believe offering health benefits is the right thing to do. It can also help with business objectives like attracting workers.

“Small businesses who offer health insurance do so because they think it’s the right thing to do,” said Tremper. “They want to provide this benefit…but current policy might actually make it more difficult for them.”

Small businesses that offer health insurance are 13% more likely to easily find employees than those that provide benefits but not health insurance, according to a study by Gusto, which processes benefits for employers. Moreover, small businesses offering health benefits are 25% more likely to say their employees perform better than expected compared to firms that offer benefits without health insurance.

Three-quarters of small businesses that offer health insurance said they want the next president to address the costs of providing the benefit, the Gusto survey found.

Tremper said there are moves the federal government could make to help small businesses provide health insurance. For example, he said employers with fewer than five employees can’t currently join to purchase healthcare.

“Allowing small businesses to create groups of small employers is another opportunity to make it a little bit easier for folks to offer them benefits like health insurance, and that’s something that employers want,” Tremper said.

Correction 11/25/25: This piece has been updated to reflect the correct spelling of Nich Tremper’s name.