Time to Get Real About Small Business Health Care Costs

While health care is a heated topic in the 2020 election and is sure to remain a focus throughout the campaign, the viewpoint and needs of small business owners and their employees are getting lost in the noise.

New national research from Public Private Strategies of 500 small- and medium-sized businesses sheds light on small business owners’ perspectives on their health care costs. The results are clear: The cost of providing health care to employees is the biggest problem small businesses face, and it’s a major issue for all types of businesses — newer, older, smaller and larger.

Our report found 74 percent of small business owners think the cost of providing health care is a problem, and 69 percent report cost increases in recent years. Of those who have seen costs rise, almost 1 in 3 (31 percent) said their costs have jumped annually by more than 10 percent each year.

Unfortunately, the struggles of small business owners to afford health coverage often translate into higher costs for employees. This can be devastating for many small business owners who consider their employees family.

But the research shows that when costs go up, small employers often resort to changing plans to ones with higher deductibles or cutting the amount of the premium they shoulder. In fact, nearly half of poll respondents said they have increased deductibles or co-pays for their employees; a quarter required employees to pay higher premiums, and 16 percent either reduced or eliminated dependent coverage.

Employers are doing everything they can to continue to provide coverage, but rising costs are making it near impossible to maintain high levels of coverage for their employees. It’s so bad that 1 in 3 small business owners have considered dropping coverage altogether.

This would be a crisis. Small business owners want to provide good coverage because it helps them compete and because they know it’s the right thing to do for employees.

The issues facing small businesses have ramifications for millions of people in this country. Small businesses employ nearly half of the private sector workforce and create roughly two-thirds of net new jobs.

Small business owners are less likely than their larger counterparts to provide coverage, and they tend to pay more for the coverage they provide. But failure to provide coverage makes it harder to compete for top talent. Indeed, in today’s tight job market, offering coverage can mean the difference in hiring your preferred employee.

That’s why small business owners are desperate for change. Our research showed that small business owners need help now and are supportive of solutions from across the political spectrum.

For small business owners, this is an existential issue, not a matter of ideological orthodoxy. We found favor for both market-based and policy-driven solutions to rising health care costs — our findings show that small business owners are so eager to deal with costs, they are open to almost any possible solution. Even government options for health coverage were popular, with almost 3 in 4 small business owners expressing support for allowing employees to buy into Medicare or Medicaid or another national government-administered health plan.

The research shows that small business owners support proposals that would increase choice, with measures such as allowing more generic drugs to come to market. And they want more transparency on pricing through requirements such as requiring pharmaceutical companies to disclose breakdowns of pricing info.

Solving the problem of high health care costs for small business owners will be a game changer for our economy. Not only will it make it easier for them to provide quality coverage for employees, helping them hire and retain top talent, but it will also help them keep more revenue to reinvest into their businesses and communities.

Politicians, including many 2020 presidential candidates, often tout small business owners as the backbone of our American economy, yet they are failing to make small business concerns the cornerstone of policy solutions. Health care must stay at the top of the agenda heading into 2020, but we must reframe the conversation and talk about solutions that will actually work for small business owners.

Regardless of the challenges they face, America’s entrepreneurs are growing and creating millions of new jobs. Our economy demands that we address the challenges holding them back from realizing their full potential. Small business owners are drowning — it’s time for policymakers to unite and provide much-needed relief. 


Rhett Buttle is the founder of Public Private Strategies and Next Gen Chamber of Commerce and the executive director of the Small Business Roundtable, and he previously served as director of private sector engagement in the Office of the Secretary at the Department of Health and Human Services and was a private sector adviser on the White House Business Council.

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