Why Small Businesses Don't Pay for Health Benefits

Study of expanded health insurance coverage in small businesses
    • November 1, 1996

From 1992 to 1995, researchers from the University of Michigan School of Public Health conducted Phase II of the Small Business Benefits Study by resurveying the small business respondents from the four original Phase I cities with respect to their businesses, their benefits and their employees. They also added three sites to the survey.

The survey was designed to determine the features and costs of the health insurance plans offered by small businesses and to assess the factors affecting the willingness and ability of small businesses to offer insurance.

Cities surveyed in Phase I included Tucson, Ariz.; Tampa, Fla.; Flint, Mich.; and Denver. Additional cities in Phase II were Salt Lake City; Tulsa, Okla.; and Cleveland.


  • Many small business employees obtained medical insurance coverage through another source.

  • The majority of employers that do not offer health insurance to their employees are simply not interested in doing so.

  • Insurance underwriting is a significant barrier to small business coverage.

  • There was no significant change over time in those businesses that were surveyed in Phase I of the Small Business Benefits Study.

  • The investigator concluded that most small businesses will not voluntarily offer insurance coverage to their employees.