Abstract

Issue: For years, small-business owners have faced rapidly escalating health care coverage costs, which affects their employees, their business, and the economy.

For years, small-business owners have faced rapidly escalating health care coverage costs, which affects their employees, their business, and the economy. Goals: To better understand employers’ perspectives on health care costs and to develop a targeted strategy for engaging and mobilizing to drive down costs and improve health outcomes.

To better understand employers’ perspectives on health care costs and to develop a targeted strategy for engaging and mobilizing to drive down costs and improve health outcomes. Methods: Key informant interviews, focus groups, and a nationwide survey.

Key informant interviews, focus groups, and a nationwide survey. Key Findings: Despite a healthy economic period, rising health care costs represent a major burden for small-business owners. As a result, most are taking steps to cut costs and would look favorably on policy changes that would help curb the cost of providing health care coverage to employees. Their preferences are not ideological; policy prescriptions across the spectrum find favor. There is significant interest in banding together with other business owners to advocate for a different approach to health care.

Despite a healthy economic period, rising health care costs represent a major burden for small-business owners. As a result, most are taking steps to cut costs and would look favorably on policy changes that would help curb the cost of providing health care coverage to employees. Their preferences are not ideological; policy prescriptions across the spectrum find favor. There is significant interest in banding together with other business owners to advocate for a different approach to health care. Conclusion: The weight of health coverage and costs threatens the competitiveness of small businesses. There are many health policy solutions that would help small businesses.

Introduction

There are an estimated 30.7 million small businesses (defined as those with fewer than 500 employees) in the United States, employing approximately 60 million people.1 Small firms make up 99 percent of U.S. employers, and these businesses create 66 percent of new private-sector jobs.2 Small businesses, like their larger counterparts, have not been shielded from the increasing cost of health care. Without advantages such as a larger pool of insured employees, more bargaining power with health insurance companies, and the benefit of full-time human resources personnel, small-business owners are often left with little recourse and few options when a health insurance carrier hikes costs.

Small-business owners meet critical needs for communities, employing more than 47 percent of the private-sector workforce and accounting for about one-third of America’s export value.3 This importance requires policymakers to consider the needs and unique circumstances of small-business owners. Further, the American public trusts small business as an institution. Gallup found that 70 percent of Americans have high confidence in small business, compared to just 21 percent who feel similarly about larger businesses.4 As trusted local pillars, they have the ears of policymakers invested in small-business owners as a constituency.

We saw the power of small-business support during the passage of the Affordable Care Act (ACA), when business owners played a significant role in building critical support for several portions of the law, such as the small-business health care exchange. Throughout the debate, small-business owners were called upon to talk about their difficulties managing health care costs.

In the first half of 2019, we conducted three phases of research (key informant interviews, two focus groups, and a national survey of 500 small employers) to better understand small employers’ current thoughts and perspectives on rising health care costs and prices, their appetite for change, and any levers they may be willing to use.

Only small-business owners who offered health insurance to their employees and who had two or more employees were included in the focus groups and survey. In both focus groups, about a third of the participants reported having 26 or more employees. In the survey of small-business owners who provide health care to their employees, about a third of the respondents reported having 26 or more employees.

Key Findings

Small-business owners are doing well and are optimistic about the future.

Most small-business owners in the survey rated current economic conditions highly (76%) (data not shown). Their businesses are doing well — 85 percent described them as excellent or good. The larger the business, the more likely owners were to report good conditions and a positive outlook for the next year.

Health care cost is a major problem.

The survey reveals that health care costs are top of mind for small businesses. When asked to choose their top two challenges, they cited the cost of providing health coverage to employees and attracting new customers (Exhibit 1).