Marissa Plescia , 2025-04-14 22:43:00
It’s no secret that small to mid-sized businesses are struggling to handle healthcare costs, and a report released last week from JPMorganChase Institute is adding to that evidence.
The report found that roughly one-third of small businesses discontinued their health insurance coverage from one year to the next. For instance, 32% of nonemployer firms—businesses without paid employees—that paid health insurance premiums in 2018 no longer did so in 2019. Similarly, 31% of employer firms—those with paid employees—that paid premiums in 2018 also stopped in 2019.
JPMorgan also looked at results post-pandemic from 2022 to 2023. During this time period, 26% of nonemployer firms discontinued paying health insurance premiums, along with 27% of employer firms.
Healthcare costs are likely the major factor driving small businesses’ decisions to stop paying health insurance premiums.
“Across our data, we have seen how small businesses manage with limited resources, suggesting that they often have to make difficult tradeoffs. Increasing health care costs can have that effect—we saw that the firms with the largest health insurance burden increases were the most likely to drop coverage,” said Chris Wheat, president of JPMorganChase Institute, in an email.
The report also showed that most small businesses that ceased paying health insurance premiums continued to operate in the years after. Among nonemployer firms, 89% continued to operate in the first year after discontinuing payments. By the end of their fifth year after stopping payments, 70% continued operating. For employer firms, 93% continued operating in their first year, and 79% continued in their fifth year.
A separate report from Morgan Health, a business unit of JPMorgan Chase focused on employer-sponsored insurance, offered qualitative research on how small businesses make healthcare decisions. It noted that while a third of small businesses stopped health insurance payments from one year to the next, this is often a last resort.
To avoid having to do this, employers will take steps like limiting hiring or business expansion. The report quoted one mid-sized business leader saying that “there would have to be a lot of cuts made in our budget before we would [discontinue benefits] … I think that would be one of the last things on the chopping block.”
There are new solutions that small businesses can implement to manage healthcare costs, but they have limited bandwidth to fully explore these options, Morgan Health stated. For example, Individual Coverage Health Reimbursement Arrangements (ICHRAs) are picking up steam, but many employers are still unaware of this possibility. ICHRAs allow employers to provide their employees with pre-tax dollars to cover the cost of individual health insurance premiums.
“Notably, [small and mid-sized businesses] have a higher barrier to integrating innovative solutions compared to larger companies, primarily due to the lack of having a dedicated Human Resources team to research the tradeoffs and to understand how these models align with their overall strategy,” Morgan Health stated.
In addition, Morgan Health found that small employers are “frustrated by the fragmented, often complex and opaque nature of existing benefits resources.” They want a resource hub to improve their health benefits knowledge and help them make healthcare decisions.
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