Small businesses feel crushed by rising health costs


The National Federation of Small Business is urging Congress to expand access to HSAs and HRAs and expand tax credits to small businesses in order to level the playing field between large and small employers.

Many small businesses that don’t offer employees health insurance continue to find the cost of such a benefit a huge hurdle, the National Federation of Small Business said, in reporting the results of a new survey.

The NFIB said that 65% of the employers who do not offer health insurance cited cost as the main reason they do not provide the benefit.

The federation conducted the survey between Sept. 26, 2022 and November 20, 2022, sending out 20,000 questionnaires; 593 businesses responded.

“The data reveals that small businesses are facing a substantial affordability crisis in providing health insurance for their employees,” NFIB said.

The federation said that 88% of the businesses with 30 or more employees who do not offer health insurance reported cost as the major reason. Businesses with 50 or more full-time employees must offer health coverage to 95% of its staff, under the ACA’s employer shared responsibility provisions, or be subject to IRS penalties.

The NFIB also reported that:

-Businesses with more employees were more likely to offer health insurance; 89% of the companies with 30 or more employees offered insurance, compared with 39% of those with one to nine employees 93% of those offering health insurance offer group health plans. Of those firms, 44% have offered health insurance since the company was founded.

-88% of small employers who offer health insurance provide it to only to full-time employees.

-Of those offering health insurance, 37% had most of employees covered by a High Deductible Preferred Provider Organization plan, while 25% had most of their employees covered by a Health Maintenance Organization.

-88% of the respondents who offer insurance purchased or renewed their employer-sponsored health plans through an agent or broker.

-94% of small business owners have personal health insurance.

-42% of the small employers who do not now offer health insurance do not expect to do so in the future.
-63% of all employers believe offering health insurance to recruit or retain employees is very important or moderately important.

Asked what the federal government can do to contain the cost of health insurance for small business, NFIB Manager of Federal Government Relations, Josselin Castillo, said that Congress could do three things to help:

Expand access to financial assistance tools such as health savings accounts and individual health reimbursement arrangements.

Encourage Association Health Plans, adding that federal rules governing such plans have been in “legal limbo” since a federal court voided a Trump Administration rule that attempted to broaden access to such plans.

Expand tax credits to small businesses in order to level the playing field between large and small employers. She said that the Affordable Care Act’s small business health insurance tax credits were temporary and too limited.

The NFIB is not alone in warning that cost is keeping employers in offering health insurance.

-“With a vested interest in securing the health and well-being of their employees, employers deliver high-value, innovative coverage,” Iyyse Schuman, senior vice president of health policy at the American Benefits council, wrote in a February letter to congressional leaders. But they are increasingly frustrated with rising costs and other impediments to innovation.

She urged Congress to “take bold steps to address the root causes of rising costs (including market consolidation, lack of competition, price and quality transparency and the prevalence of chronic conditions) and promote value-based payments.”

She also asked Congress to reject proposals that simply shift costs to employers rather than address the real causes of rising health care costs.
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