Employers are bracing for double-digit increases in healthcare costs, and small businesses could face the biggest squeeze.
A new survey from consulting firm Marsh shows employers expect health benefit costs to rise 8.2% per employee in 2027 — the highest increase since 2003. Without changes to their current plans, costs could jump 11%.
"Being able to offer health insurance is something most small businesses want to be able to do," said Brad Close, president of the National Federation of Independent Business.
Small business owners especially are finding it harder to keep offering health plans that everyone can afford without cutting benefits, freezing wages, or passing on costs to consumers.
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The smaller the workforce, the more severe the financial impact if just a single worker faces a serious illness.
"If you have four or five, 10 employees and one of them gets very sick, the costs, even though they get spread out, it can be overwhelming for a small business and it can force decisions on whether they actually can offer to keep health insurance or not," Close said.
Jennifer Schaefer, founder and CEO of JS Benefits Group, is an employee benefits strategist who also runs her own business. She said the gap between large and small employers is significant.
"When you're a larger employer, you have the ability to self-insure in a way that smaller employers can't," she said.
Despite the additional costs, Schaefer said most companies realize that good benefits are key to keeping skilled workers.
"I do believe most employers are doing the best they can and that they really do want to keep their employees whole," she said. "If they can, they will."
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To control costs, some employers are turning to options like health reimbursement arrangements (HRAs), high-deductible plans paired with health savings accounts (HSAs), and gap insurance.
Close adds that lawmakers need to keep small businesses in mind when crafting healthcare policy.
"Sometimes ideas they think are going to help the insurance market may work really well for the big guys but may end up making things worse for the small businesses," Close said. "That's something that policymakers tend to lose sight of."
