A new report from JPMorgan Chase offers insight into how healthcare premiums affect some of the smallest businesses in the U.S.
The analysis, published Wednesday, relied on de-identified data of small businesses that had Chase Business Banking deposit accounts and met the researchers’ criteria for being “active and small.” The businesses also had to have evidence of regular electronic health insurance premium payments.
About 81% of small businesses in the U.S. have no employees and have to buy health insurance for themselves and their families on the individual market unless they have coverage through another source. The analysis refers to these businesses as “nonemployer small businesses.”
According to the analysis, health insurance premiums are increasingly taking up a larger share of operating expenses for nonemployer businesses, though “tax credits could be moderating premium growth for some.” Over the last five years, nonemployer health insurance premium payments have risen by 19%.
JPMorgan Chase also found challenges for businesses with less than 50 employees, particularly those with lower revenues. Unlike companies with 50 or more employees, businesses with less than 50 employees do not face penalties if they don’t offer health insurance benefits. However, they may still choose to do so “as part of competitive pay and benefits packages for their employees,” the report said.
For smaller businesses with less than $600,000 in annual revenues, the median health insurance payroll burden was about 12%. For firms with more than $2.4 million in annual revenues, the burden was 7%. The report also stated that premium payments for these businesses have risen by 33% over the last five years.
“[Small] businesses are struggling with paying for the cost of health insurance. And with every passing year, it’s getting worse. It’s consuming a larger portion of their expenses relative to larger employers,” said Dan Mendelson, CEO of Morgan Health, in a recent interview. Morgan Health is a JPMorgan business unit focused on employer-sponsored insurance.
The findings come at a time when about half of Americans get their health insurance through their employer, and more than 27% of private sector employees in 2023 were employed at businesses with one to 49 employees. In addition, rising healthcare costs have become a significant problem for all employers, big and small.
Based on the JPMorgan Chase analysis, Mendelson stressed the importance of “more product being developed that is attended to cost and quality for small and medium-sized businesses.” He also said that small and medium-sized businesses need to prepare for healthcare costs in the future and that brokers need to better serve small employers.
“I think small and medium-sized businesses really need to educate themselves about what’s going to happen in the future to prepare because you can’t just turn on a dime if you wait,” he said.
“I think the other implication is that the brokers are really not serving small and medium-sized businesses the way they need to,” he continued. “The brokers are compensated to sell standard commercial insurance products, and that’s what they do. And they do it well. If a standard product is not really serving the interests of the small and medium-sized business, there’s a conflict and that’s something that we are also interested in addressing.”
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