Rising medical expenses are significantly impacting small business owners throughout the United States.
As the midterm elections in November approach, there’s increasing concern about health care affordability nationally. Analysts indicated that many local businesses are finding it tough, often cutting bonuses and facing other challenges due to escalating health care costs. Some are even laying off employees or deciding not to hire new ones.
Tyler Deaver, who oversees federal government relations, mentioned that a lot of small businesses have resorted to reducing employee hours amidst increasing worries about health care costs. He noted, “Small businesses are feeling the pressure from rising health care expenses, creating a challenging situation for owners. They have to choose between absorbing higher premiums or trimming costs elsewhere, which could mean cutting back on hours, letting people go, eliminating bonuses, or even dropping health insurance completely—something that would hurt their ability to attract talent.”
Deaver also mentioned that the Trump administration believes that improving access to affordable health care could help mitigate rising costs.
He elaborated on potential actions the administration could take, such as restoring and extending short-term limited-duration coverage, which was reduced under the Biden administration. These policies had allowed coverage for up to three years and making it available for more people, but recent changes aimed at pushing them into the Obamacare marketplace.
Other initiatives he suggested include legislative efforts to facilitate health insurance for small businesses and relaxing restrictions on health savings accounts (HSAs).
Deaver pointed out that “having more coverage options can provide necessary flexibility and offer a better solution for small firms hoping to deliver meaningful benefits.”
Almost half of small employers in the U.S. report experiencing decreased profits or outright losses, and many find it challenging to manage rising health insurance premiums. A recent NFIB study reflected that 98% of small businesses offering health insurance are worried about the costs associated with it.
Health insurance comes second only to payroll as the largest expense for these businesses. The median premiums for small employers have increased by 23% since last year, outpacing inflation.
According to a JPMorgan Chase report, a hefty 65% of small businesses that do not provide health insurance cited cost as the main barrier.
Alexis D’Amato Falvey, senior director of federal government affairs at Small Business Majority, noted that many owners are struggling to make necessary investments or hire new staff due to soaring health care costs. She mentioned that high health care expenses force many small businesses to choose between their growth and providing necessary employee benefits.
She added that over 71% of insured employers reported an increase in their health insurance premiums this year. Despite ongoing discussions in Congress about making health care more affordable, 78% of entrepreneurs believe there have been no effective changes regarding costs for small businesses.
Falvey argued that the administration should push for legislation to increase price transparency in hospitals and promote greater competition in health care. Many business owners feel they cannot afford to provide substantial health benefits to their employees due to rising costs.
Furthermore, she expressed that high health care costs present a barrier for potential entrepreneurs, with many fearing they would lose their insurance benefits if they start a business.
She concluded, “Access to health care shouldn’t hinder small businesses or employees; this issue will persist as long as health care costs continue to rise.” With high medical costs, small and medium enterprises struggle to compete for top talent.
John Goodman, a senior research fellow at the Independent Institute, suggested that allowing insurance companies to offer health care could reduce service costs, indicating the potential effectiveness of this approach.
In 2023, roughly 49% of small business employees in the U.S. worked for companies that provided health insurance. A Gallup survey noted that 61% of Americans are significantly worried about affording their health care costs.
In early April, President Trump introduced tariffs on patented medicines to enhance national security and public health. Earlier this year, he also unveiled a new health plan aimed at improving competition and reducing wasteful spending.
