Rising Health Insurance Costs are Hurting the Smallest of Small Businesses 

By Consumers for Quality Care, on July 17, 2024

The cost of health insurance is disproportionately affecting the smallest of small businesses, according to an analysis conducted by the JPMorgan Chase Institute and reported by Axios.  

The analysis found a correlation between the size of a business and the share of revenue they allocate for health care benefits for their employees. For businesses with two employees and that generated revenues of $600,000 or less, 12 percent of their payroll costs went toward health-insurance coverage. But when a small business reported revenues of at least $2.4 million, just 7 percent of its total payroll costs went to health care. According to the U.S. Bureau of Labor Statistics, the average small business, which is defined as 49 employees or less, spends 5.8 percent on health insurance coverage for employees. 

Dan Mendelson, CEO of Morgan Health, described how increasing health care costs particularly hurt very small businesses, saying, “Health care expenses are eating a bigger and bigger chunk of the expense and profitability line for these businesses. It is more difficult for these small businesses, which really are the engine of the economy, to thrive.” 

This analysis comes just after the National Bureau of Economic Research released a report  that shows how rising health care prices can hurt job growth. Their report found that when health costs increase, it drives up the cost of health insurance, forcing employers to hire fewer employees or even lay employees off. 

CQC is concerned about the growing trend of soaring health-insurance costs for small businesses. We urge policymakers to address the rising costs of health insurance so that all consumers have access to affordable and quality care.