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Small businesses in the service industry are more likely to drop insurance coverage of their employees, according to Rohit Arora, CEO of

In recovering economy, health insurance important to many employees

by Stephanie Howson and Victoria Yates
March 14, 2013


Victoria Yates/MEDILL

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It’s widely debated by pundits and policy experts whether impending Obamacare regulations will push employers to forego insurance coverage of their employees. But there is evidence that health insurance is an important factor for employees and that coverage could weigh heavily in their decisions to take future positions.

For some businesses the most affordable option may be simply to drop employee coverage altogether in favor of paying penalties for not offering insurance.

But when asked if he would rather accept a position with health benefits or a higher paying job, Jeff Rice, an African Studies professor at Northwestern University, said he would take the benefits.

“If you asked me and I was 23 I would give you a different answer, but I’m 63 and I have health issues," Rice said. "So right now as I go into everyday life I have to make sure that I’m protected.”

Rice’s family members also played into his decision to take a position in which he was adequately insured as they, too, could be covered under his plan.

Even for those who said they would trade higher pay for insurance, their focus was still on having enough money to cover healthcare costs.

“Because I have to factor in how much insurance I have to get, if it’s enough for me to get a good one, I’ll take the job that pays more,” said Jaime Gorgojo, a 30-year-old musician.

For those entering the job market for the first time, health insurance is not as pressing a concern thanks to the Obamacare provision that children can stay on their parents’ insurance until age 26.

“I would take the job that would pay more without the health insurance because I’m covered under my dad,” said Leah Schenkier, a 22-year-old rehabilitation aid. “Thank you Obama,” she said with a laugh.

Schenkier’s friend Cordelia Herman, a 23-year-old retail associate who is also on her parents’ health insurance, agrees now but can see her view changing. “Later in life I would plan to find a job with better health benefits,” she said.

Asked if they’d be comfortable without insurance, both women were resolute. “Definitely no, especially as a woman,” Herman said.

“I second that,” Schenkier said. “You have to have health insurance.”

By Jan. 1, small businesses with over 50 employees that don’t already offer affordable health insurance will be required to do so by law. If these businesses choose not to provide coverage they will be charged a $2,000 penalty per employee except for the first 30 workers. That may end up costing them less than paying for health insurance.

Although smaller businesses with 25 employees or fewer are not mandated to follow suit, those that do will be eligible for a small tax credit.

“Small business owners want to do the right thing,” said Kim Clarke Maisch, the Illinois state director of the National Federation of Independent Business. “They want to have health insurance.” But for certain business owners the huge cost is a deterrent, she added.

Experts say companies’ decision to drop insurance coverage for employees likely will vary by industry.

Low-skilled industries such as retailers and restaurants that employ large numbers of people are among those most likely to drop coverage in favor of paying the penalty, said Rohit Arora, CEO of

Even so Arora doesn’t see a drop in coverage in favor of penalties becoming the new normal. “I don’t think that’s going to be a trend overall,” he said. What he expects going forward is that most businesses will ask their employees to contribute more.

Sam Gibbs, senior vice president of eHealth Inc., believes that businesses need to offer health insurance to stay competitive.

“Certainly the politics of health insurance reform have been really thick the past few years,” Gibbs said. If companies drop health insurance it will be because they can’t afford it anyway, not because of health care reform, Gibbs said.

Whether offering health insurance makes businesses more attractive to workers depends on the nature of the business and what its competitors are doing, said Susan Shargel, president of Shargel & Co. Insurance Services.

In a recession, people are going to take any job they can get, with or without health insurance, she said. “But when the economy turns around, you’re going to have to offer health insurance.”