Feb 25, 2022 - Health

Small businesses feel most crushed by rising health costs

Illustration: Allie Carl/Axios

Health care is a major benefit in attracting employees, but the rising costs serve as a barrier for small employers that already have a more difficult time competing for workers.

The big picture: Only 58% of companies with fewer than 200 workers and 31% of companies with fewer than 50 workers offer health insurance, and that insurance comes with much higher deductibles on average, surveys show.

Driving the news: Those small employers that offer coverage haven't changed their health plans much, even despite the financial shock of the pandemic.

  • Companies told researchers at Georgetown University and the Urban Institute that they kept benefits because they didn't want employees losing health care during the pandemic, and didn't want workers jumping ship to competitors.

Between the lines: Small businesses can band together in some instances to try and get better deals on their health care, but that opens them up to financial peril if medical claims soar unexpectedly.

  • "There's a lot of misadventures that small employers can get into when they try to save a dollar," said Kathy Hempstead, a health insurance expert at the Robert Wood Johnson Foundation.

Zoom in: Tim Eichinger co-owns Black Husky Brewing in Milwaukee and covers four full-time employees, including him and his wife.

  • The premiums are expensive, so the brewery's coverage comes with a deductible of more than $6,000, he said.
  • Eichinger, who turned 60 last year, said he needs knee replacement surgery, but the out-of-pocket costs of his own coverage are causing him to "push it off a few more years until I get on Medicare."

The bottom line: "It really does limit the growth of small companies like ours," Eichinger said.

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