The high cost of health insurance threatens Main Street. It’s time for Congress to act

Ever-rising health insurance costs are crippling America’s job creators and communities nationwide. For four decades, the cost of health insurance has been the No. 1 problem for small businesses. The problem is now exploding into a crisis, according to the latest survey from the National Federation of Independent Business. A stunning 97 percent of small businesses report that health care costs will become unsustainable for them within the next decade.

Small business owners are being forced to make tough decisions in response to these skyrocketing costs. The percentage of small businesses offering health insurance has dropped dramatically in the last decade from roughly 40 percent in 2010 to 30 percent in 2021. Meanwhile, the businesses that do offer coverage have no choice but to pass rising costs on to their customers. Almost half of small employers (46 percent) report raising their prices. And half of small employers earn less due to health insurance premium increases over the last five years.

Small business owners desperately want to take care of their employees, but the broken health insurance system makes it harder to compete in attracting top talent. Main Street faces higher costs than large corporations because small businesses don’t have the same market power and face higher regulatory requirements and mandates.

Take NFIB small business owner member Kelly Moore. Kelly and her husband, Greg, are the proud owners of a National Automotive Parts Association small business in Ohio. Like many others, they’ve had to make once unthinkable choices to keep their businesses afloat. They used to offer a group health plan, contributing to 80 percent of their employees’ premiums. Skyrocketing premiums ultimately forced them to terminate the benefit, which Kelly says was gut-wrenching.

Small business owners like Kelly and Greg have been warning elected leaders for four straight decades about the crisis they face. Yet few politicians have stepped up to deliver. That is truer than ever now as small businesses struggle to rebound from crippling inflation, worker shortages, and looming supply chain constraints that further exacerbate costs.

What small businesses really need is congressional leadership. It’s encouraging that Congress is holding hearings on health care affordability, listening to small business owners and their challenges. But action is what’s needed most. Lawmakers should empower small businesses with more choices instead of a one-size-fits-all approach that neglects to consider each business’s unique needs.

First, Congress should expand access to financial assistance tools like health savings accounts and individual coverage health reimbursement arrangements. The latter are an attractive option for many small employers as they allow them to provide a tax-preferred contribution for employees to buy an individual plan that best fits their needs. Many small businesses also rely on HSAs, which employers and employees can contribute to tax-free. Unfortunately, only 10 percent of Americans qualify for these accounts. Broadening eligibility for HSAs by de-decoupling them from high deductible health plans and raising contribution limits will enable small businesses to pay for their workers’ out-of-pocket costs, financially empowering their employees.

Lawmakers should also encourage more Association Health Plans. These allow small businesses to band together when purchasing health insurance, resulting in lower costs due to greater bargaining power. Current federal rules are in legal limbo since a federal court voided a Trump-era regulation that sought to broaden access to these plans. The Biden administration may propose eliminating them soon. Congress should instead provide legal certainty, encouraging more small businesses to participate in these plans.

Finally, lawmakers must improve and expand the small business health insurance tax credit to deliver long-overdue promised relief. The Affordable Care Act’s small business health insurance tax credit was too limited and temporary, delivering minimal benefits because of their strict requirements. Most small businesses never qualified. In the latest year for which data is available, the Internal Revenue Service reported that only 6,952 businesses took the credit, totaling just $30 million in help. That number is certainly fewer now. Making the tax credits more accessible to businesses with over 25 employees, with fewer limitations, would help offset the excessive cost of group health insurance, providing a reprieve for small employers and employees.

When small businesses are forced to cut back on health insurance or other benefits, it hurts their ability to attract talent, reward their employees, and build up their communities. After 40 years of small businesses saying this is their top problem, it’s time for Congress to step up and finally make health insurance affordable for Main Street.

Josselin Castillo is a manager of federal government relations at the National Federation of Independent Business.