Age of firm affects likelihood of small firms offering coverage

A new Kaiser Family Foundation analysis examines the relationship between the age of a firm and its likelihood of offering health coverage for firms with less than 100 employees (Source: "Offer rates for smaller establishments by business age," Snapshots: Health Care Costs, Kaiser Family Foundation, May 2008).  The analysis divded these firms into three groups: less than 10 employees; 10 to 24 employees; and 25 to 99 employees.  It looked at data from the Insurance Component of the Medical Expenditure Panel Survey for the years 1997 to 2005.

According to the study, firms with less than 5 years of age had the lowest rate of offering health insurance coverage.  For firms with less than 10 employees 24 percent of firms with less than five years of age offered health benefits compared to 32 percent for firms between 5 and 9 years of age, 37 percent for firms 10 to 19 years of age, and 43 percent for firms with more than 20 years of age.  The report also found the greatest volatility in offer rates occurs across years among firms with less than 5 years of age. 

The report concludes that "These findings suggest that policymakers interested in policies to boost health benefit offer rates may want to give special focus to the issues faced by smaller businesses starting-up or in the early years of operation. Special subsidies or special insurance products for these businesses or their workers may be needed in order to encourage more offering."