NFIB: Employer-provided health coverage becoming ‘unsustainable'
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A new report from the National Federation of Independent Businesses (NFIB) states that the rapidly increasing cost of health insurance is crippling small businesses in the United States, and that the small-group insurance market faces “an inevitable collapse.”
The six-page policy paper, “Addressing the Health Insurance Affordability Crisis for Small Businesses,” was released Tuesday. It states that the small-group market, where most small businesses purchase coverage, “is in a death spiral.”
According to the U.S. Administration Office of Advocacy, 99.4% of Connecticut businesses are small businesses and employ 47% of the state’s workforce.
The NFIB report states that the number of participants in the small-group market has declined sharply. The market ended in 2023 with 8.5 million participants, down 43% from nearly 15 million in 2014. Issuer participation has also dropped, falling from an average of 13 in 2015 to just five in 2020.
In Connecticut, enrollment in fully insured small business health plans shrunk by more than 50% over a six-year period ending in 2023, according to an HBJ analysis of industry data.
Connecticut has seen its share of insurers leave the small-group market over the past several years, including Farmington-based ConnectiCare, Harvard Pilgrim HealthCare, Bloomfield-based Cigna Healthcare, New York-based insurance technology company Oscar and Hartford-based Aetna Inc.
With fewer options available, the average cost of an individual health insurance plan has increased by 120% for firms with less than 50 employees, while average family premiums have increased by 129% in the last 20 years, the report states.
“Continuously rising health insurance costs are a significant burden for Connecticut's small businesses,” said NFIB Connecticut State Director Andy Markowski. “For decades, health insurance costs have been the number one concern for small business owners. As this new paper shows, Connecticut's small-group market is in crisis, premiums are unsustainable, and small businesses are being forced to make difficult choices among ever-waning options.”
He noted that the state legislature has introduced bills in the current session that would make it even more difficult for small businesses to access and afford stop-loss insurance, while also adding coverage mandates.
“If Connecticut legislators continue to make it more expensive and more frustrating for small businesses to provide health insurance to their employees, Main Street businesses lose,” Markowski said. “Their employees lose. We all lose.”
Some other key findings from the report:
- Only 30% of small businesses still offer health insurance, down from nearly 50% in 2000.
- 98% of small businesses say they are concerned about whether they will be able to afford to continue offering health insurance in the next five years.
- Small businesses pay twice as much for health insurance as large businesses. Firms with less than $600,000 in revenue spend nearly 12% of payroll on health benefits, vs. 7% for firms with over $2.4 million in revenue.
The NFIB policy paper also includes some recommendations for legislators, both at the state and national level. They include:
- Protecting employer-sponsored insurance.
- Protecting small businesses’ access to affordable stop-loss insurance.
- Allowing employer pooling arrangements, including so-called association health plans.
- Supporting small businesses with targeted health insurance tax credits.
- Expand individual coverage health reimbursement arrangements (ICHRAs).
- Encouraging more competitive health care and insurance markets, and
- Discouraging hospital consolidation.
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