A new report from JPMorgan Chase offers insight into how health insurance costs affect small businesses in the United States.
The analysis, released Wednesday, was based on anonymized data from small businesses that had deposit accounts with Chase Business Banking and met the researchers’ criteria of being “active and small.” The businesses also had to have evidence that they regularly paid their health insurance premiums electronically.
About 81% of small businesses in the U.S. have no employees and must purchase health insurance for themselves and their families in the individual market unless they obtain insurance from another source. For the purposes of this analysis, we refer to these businesses as “nonemployer small businesses.”
Health insurance costs are making up an increasingly large portion of nonemployer businesses’ operating costs, but “tax credits may be helping to limit some of the premium increases,” according to the analysis. Over the past five years, health insurance costs for nonemployer businesses have risen 19 percent.
JPMorgan Chase also found that there are challenges for businesses with fewer than 50 employees, especially those with lower revenues. Unlike businesses with more than 50 employees, businesses with fewer than 50 employees are not penalized for not offering health insurance benefits. But the report said companies may still choose to offer health insurance benefits “as part of a competitive compensation and benefits package for employees.”
For small businesses with annual revenues of less than $600,000, the median payroll contribution for health insurance was about 12%. For businesses with annual revenues of more than $2.4 million, the contribution was 7%. The report also states that premium payments for these businesses have risen 33% over the past five years.
“[Small] “Companies are struggling to pay for health insurance, and it’s getting worse every year. Health insurance is a bigger part of their expenses than larger companies,” said Dan Mendelsohn, CEO of Morgan Health, a JPMorgan division that focuses on employer-sponsored insurance, in a recent interview.
The findings come at a time when roughly half of Americans get their health insurance through their employers and more than 27% of private sector employees will be employed by businesses with between one and 49 employees by 2023. Additionally, rising health care costs are a significant issue for all employers, large and small.
Based on JPMorgan Chase’s analysis, Mendelson stressed the importance of “further developing cost- and quality-conscious products for small businesses.” He also said that small businesses need to prepare for future health care costs and that brokers need to better serve small business employers.
“I think small businesses need to educate themselves and prepare themselves for what’s going to happen in the future, because if they wait, they’re not going to be able to pivot quickly,” he said.
“I think the other implication is that brokers are not providing the services that small businesses need,” he continued. “Brokers get paid to sell standard commercial insurance products, that’s what they do, and they do it well. If the standard products aren’t really serving the interests of small businesses, then there’s a contradiction there that we’re interested in addressing.”
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