Soaring healthcare costs killing small businesses

OPINION:

Starting a business should not mean gambling with your family’s health. Yet for millions of entrepreneurs, it increasingly does.

Nearly 1 in 5 small-business owners and self-employed workers rely on the Affordable Care Act marketplaces for insurance. They just got the awful news that exchange plan premiums will likely jump 15% in 2027, the second consecutive year of double-digit increases.

Those hikes could stop new businesses before they start, as would-be entrepreneurs conclude that it will be prohibitively expensive to leave their jobs and forgo employer-sponsored coverage.

Researchers have found that a $100 increase in monthly premiums for a benchmark ACA plan corresponds with an 18% decline in the rate at which workers enter self-employment.

The businesses that purchase “small group” coverage are not faring any better. Insurers are seeking average premium increases of 13% in Maryland, 14% in Maine, 17% in Oregon and nearly 26% in New York, according to state insurance commissioner rate filings.

Left unchecked, these soaring costs, along with other pressures driving up healthcare spending, will force some small companies to cut healthcare benefits and deprive others of the capital they need to hire and grow.

Small businesses across the country desperately need Congress to bring down premiums by taking on the insurance oligopolies that thwart competition and keep prices high.

Some 97% of commercial insurance markets are highly concentrated, according to the American Medical Association. In roughly 1 in 4 U.S. markets, a single insurer controls at least half the market. With so few meaningful alternatives, employers often have little recourse when insurers raise premiums or scale back coverage.

Insurers naturally deny blame for rising costs, instead pointing the finger at hospitals, doctors and others in the healthcare system. There is some truth to that defense. Still, it ignores the fact that large insurance conglomerates now own many of those other businesses.

UnitedHealth Group, for instance, comprised nearly 2,700 subsidiaries as recently as 2024. These include physician practices, pharmacies and a pharmacy benefit manager that determines which medicines healthcare plans cover and, in some cases, where patients can access treatments.

As a result, it can control virtually every stage of a patient’s care and generate inflated profits by redirecting patients among its various subsidiaries.

So when insurers blame the rising cost of care on others, they are often just blaming their own subsidiaries or sister companies.

Many small businesses have been forced to drop their healthcare benefits entirely. Just 59% of firms with 10 to 199 workers offered coverage last year, down from 67% five years earlier.

When small firms cannot afford to provide healthcare benefits, it obviously hurts their employees. It also hurts businesses by making it harder to compete for talent against larger companies that can still offer generous insurance packages.

Even when small businesses can stomach the premium hikes, the increased expenses often force them to scale back hiring and expansion plans.

That has dire consequences for the overall economy. Small businesses create nearly two-thirds of new jobs and contribute more than 40% of U.S. gross domestic product. If rising healthcare costs prevent small firms from growing — or push them out of business entirely — it will mean less job creation.

The stakes are especially high for Black communities. Most Black-owned businesses are small, yet collectively, they support approximately 1.8 million jobs nationwide and are more likely than other firms to hire Black workers.

They also play a critical role in reducing racial wealth disparities and improving economic mobility. When these businesses struggle, so do entire communities.

Policymakers can protect America’s economic dynamism by holding insurers accountable for self-serving practices that needlessly inflate costs. They should prohibit conglomerates from forcing patients to use affiliated providers or pharmacies when more affordable options are available, and mandate greater transparency to prevent price gouging.

Regulators should also consider invoking antitrust laws against the leading insurance conglomerates.

Business owners should not have to choose between taking care of their employees and investing in their companies’ future. By restoring competition and transparency to health insurance markets, our leaders could give small-business owners more opportunities to hire, grow and pursue the American dream.

• Ron Busby is president, CEO and founder of the U.S. Black Chambers Inc.