A research brief from the Center for Retirement Research at Boston College finds that a measure intended to help older workers find work—especially in smaller firms—wasn’t much help.

Limiting the premiums insurers could charge for health insurance on workers in smaller firms, a provision put forth by most states during the 1990s, was intended to benefit both workers and firms—the former, in being able to find employment and at better pay; the latter, in not being hit with more expensive health insurance premiums across the board for their employees.

However, the study finds, while there was some improvement in the pay provided by small employers to older workers, there was no increase in employment at all.

Prior to the health insurance reforms that restricted “how much employer-sponsored health insurance premiums can vary across small firms based on the characteristics of their workers,” the study says, “a small firm that hired even one additional older worker ran the risk of higher premiums for all of its workers.”

And with the increasing need for older workers to continue to stay on the job to augment slim retirement savings—particularly among those who are “less-educated … who often hold middle-skill jobs that are at greater risk of disappearing,” the measure was intended to increase their prospects of finding, and keeping, work.

Smaller firms were at a particular disadvantage prior to the reforms, since if insurers could charge more for older workers a small firm would have far fewer employees among whom to spread the cost. If older workers were hired, that made it more expensive for everyone.

According to the study, “By reducing the cost of providing health insurance for older workers, the premium restrictions were expected to increase their employment at the small firms affected by the law.

In addition, the restrictions were also expected to increase older workers’ earnings at small firms, because lower health premiums could allow employers to pass on the savings to workers in the form of higher wages.” The restrictions weren’t expected to have either effect at larger firms, whose premiums weren’t affected.

But while there was some improvement in pay for older workers at smaller firms—particularly in states with the strongest premium restrictions—there was no effect on employment for older workers.

In addition, the study finds, “contrary to expectations, older workers do not appear to benefit much more than prime-age workers” when it comes to pay. Also, “high school dropouts actually saw the earnings gap between large- and small-firm workers increase.”

The study concludes that “policymakers may want to consider trying more direct measures, perhaps by eliminating payroll taxes for older workers and their employers.”

Instant Insights /

Health premium limits for older workers not much help

More From HR Executive

Related Stories

Recommended For You