Health Costs Rise 18% for Small and Medium-Sized Businesses

Healthcare costs for small and mid-sized employers are projected to rise by nearly 20% as a result of increasing inflation and medical expenses, according to a new report by Morgan Health, a unit of JP Morgan. This rise disproportionately affects smaller businesses compared to larger companies, where costs are expected to increase by about 8-10% this year.

The Morgan Health report indicates that 30% of small businesses with fewer than 50 employees reported worsening health insurance costs impacting their overall business situation, in contrast to 22% of larger small-and mid-sized businesses. Smaller firms often do not take measures to mitigate these rising costs, as they are not mandated to provide health insurance and may choose to eliminate coverage entirely.

The survey involved responses from over 1,000 U.S. small and mid-sized businesses, evenly divided between those with 1-49 employees and those with 50-499 employees. Respondents held roles in leadership, human resources, finance, or operations.

Traditionally, larger employers enjoy lower health insurance costs as a result of pooling premiums from a greater number of employees, thereby distributing medical costs more broadly than smaller employers can manage.

Other findings from the report include:

1. Small- and medium-sized businesses encounter challenges with health insurance information, leading to a growing interest in digital and AI tools. 89% would invest time to learn new tools that simplify plan selection, and 75% believe AI-enabled tools could lessen their dependence on outside experts.
2. 71% of small- and mid-sized businesses have implemented measures in the past three years to tackle rising costs, such as wellness programs, budget cuts, or cost shifts to employees.
3. More than half of the businesses are either currently working with brokers or considering doing so; however, 20% have changed brokers and 53% have thought about it. The lack of transparency regarding broker compensation contributes to diminished confidence in decision-making for 51% of these businesses.