How smaller employers can offer health insurance to their workers without bankrupting them: risks and insurance

Derrick Wong is Head of the Employee Benefits Practice at Risk Cooperative, a minority-owned insurance brokerage and risk advisory firm based in Washington, DC. He has a BS in Business Administration from St. John Fisher College and has over 12 years of experience as a chartered professional in the health insurance industry. Derrick can be reached at [email protected]

The Affordable Care Act (ACA) extended health coverage to more than 20 million uninsured Americans and strengthened consumer protections. However, the legislation has not significantly changed employer-sponsored coverage, the main source of private health insurance in America.

Despite the widespread availability of employer-sponsored health insurance, low-wage workers, particularly in the healthcare sector, continue to face significant challenges in obtaining adequate and affordable health insurance.

A 2019 US Census Bureau report shows that the healthcare workforce comprises nearly 7 million people across three categories of low-paying healthcare jobs:

  • Assistants in the healthcare sector (nursing staff, medical assistants and pharmacy assistants)
  • Direct caregivers (home nurses, nursing assistants and personal care assistants)
  • Healthcare workers (housekeepers, janitors and catering workers in hospitals and nursing homes)

According to the US Bureau of Labor Statistics, the median wage for direct care workers in 2021 was just $14.15 an hour, almost $8 an hour below the median wage in the United States.

With ongoing and growing healthcare labor shortages, demand for home health and personal care services is expected to increase by 33% by 2030. As the baby boomers age and the population of Americans over 65 increases, this increase in labor demand without providing them with adequate access to health care is worrying.

For one thing, the rising cost of employer-sponsored insurance eats away at the wages of these low-income earners because health insurance accounts for a larger proportion of their total compensation. In fact, the cost of health insurance and medical care pushed up to 7 million people in low-income households into poverty.

Additionally, the prohibitive cost of providing health insurance for businesses makes it more lucrative to eliminate low-skill jobs through offshoring and automation.

Current ACA policies favor applicable large employers (ALEs) who have the resources to meet regulatory requirements and provide quality health insurance; while smaller ALEs struggle to provide adequate insurance coverage. Government support in the form of targeted subsidies would help close this healthcare cost gap – not just for healthcare workers, but for all industries.

One model, the Service Contract Act, helps small and medium-sized businesses with low-income workers by requiring employers to allocate funds for health care services to contract employees in the public sector. Federal funds are provided to these employers within the government contract sector to help them meet the requirement. A program to support mid-sized companies in other industries would increase the ability for employers to offer workers comprehensive and affordable health insurance without risking bankruptcy.

The country’s aging population, combined with the uncertainty of a future pandemic, underscores the need to protect access to healthcare for essential workers.

As policymakers continue to explore ways to build on the ACA, they should prioritize solutions that focus on the needs of low-income workers, particularly those that provide quality care to the masses. &

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