Stethoscope on the dollars. Medical costs. Healthcare payment concept. Concept of analysis of the market and economy and interest rates
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Healthcare expenses for small and mid-sized businesses are climbing by almost 20% as these employers face rising inflation and medical costs, according to a new report.
The Morgan Health analysis, released by a unit of JP Morgan on Wednesday, highlights how these costs disproportionately affect smaller businesses. Studies this year indicate that health insurance costs for larger employers are increasing by 8-10%.
The Morgan Health report states that nearly 30% of small and medium-sized businesses with fewer than 50 employees say health insurance costs are worsening their business condition, compared to 22% of larger businesses. Smaller firms often do not take measures to mitigate these rising costs, sometimes because they are not obligated to provide coverage and may choose to discontinue it.
The survey by Morgan Health involved over 1,000 U.S. small and mid-sized businesses, split evenly between those with 1–49 employees and those with 50–499 employees, with respondents in leadership, HR, finance, or operations roles.
Typically, health insurance is less expensive for larger employers due to a larger workforce to distribute costs across the premium pool. This pool is used to cover medical claims, meaning smaller employers face higher health costs because their premium pool is smaller.
Key findings from the report include:
- Small and medium-sized businesses struggle with unclear health insurance information, leading to a growing interest in digital and artificial intelligence tools. A significant 89% are willing to invest time in learning new tools if it simplifies plan selection, and 75% believe AI-enabled tools could reduce dependency on external experts.
- In the past three years, 71% of small and mid-sized businesses have taken actions to counter rising costs, such as implementing wellness programs, cutting costs elsewhere, or shifting expenses to employees.
- More than half of these businesses are either working with or considering brokers, though 20% have changed brokers and 53% have thought about it. The lack of transparency regarding broker compensation leaves 51% of small and medium-sized businesses less confident in their decisions.
