Helping Small Businesses Find Better Health Insurance Options
American businesses are struggling with health insurance options. Year over year, premium costs grow at rates in the high single digits – with some markets facing even steeper growth. Administrative complexity, denials of care and information gaps are increasingly commonplace. The standard fully insured products offered to small businesses – who employ about half of the U.S. workforce – are increasingly causing financial hardship and frustration among workers.
Employers are limited in their ability to influence market dynamics in a way that would materially change or innovate insurance design. This is particularly true for small businesses who often feel trapped in a cycle of rising costs and limited affordable options. For example, if a hospital raises commercial rates because factors like increased labor costs, reductions in Medicaid eligibility or the need to invest in better technology, a small business leader has little recourse other than to drop the product.
Yet offering health benefits is a central part of a company's culture and growth strategy. Consider a small business owner with about 10 employees. They care about the people working for them – as staff in a small business are typically seen as family. In addition, small businesses need to provide health insurance to attract the best talent, and this will continue to be the case in the future.
Bringing more affordable, flexible benefit options needs to be a priority for all of us working in health care. As our team at Morgan Health has convened small businesses over the past year, we consistently hear that leaders seek more control over health insurance costs, and that they want to offer employees choice in selecting their own health plan.
Individual Coverage Health Reimbursement Arrangements offer a solution in many markets. ICHRAs (for short) were first introduced in 2020 – enabling employers to offer their employees a tax-free allowance to purchase health insurance plans on the individual marketplace.
Small businesses represent the main cohort of ICHRA adopters to date. We expect this trend to continue. Based on early data and use cases, there is a business imperative to further scale and build upon this model. ICHRAs offer several advantages, including:
ICHRAs enable employers to provide health insurance to their employees through subsidies – meaning that their stability and sustainability is dependent on a strong, robust individual insurance marketplace. Given that ICHRAs have shown promise in supporting small businesses, policymakers will need to prioritize efforts that support broader implementation.
These priorities should include codifying the federal regulations that allow for the ICHRA offering, as well as policies that promote greater flexibility for employers and employees and reduce administrative burdens for employers who choose ICHRAs. In turn, this would expand health coverage and access across the U.S. – ensuring more Americans are enrolled in coverage that supports their health care needs and financial risk tolerance.
It's commonly said that small businesses are the bedrock of the U.S. economy. Less acknowledged is the pivotal role of small business in supporting the US healthcare system. Health care stakeholders across the spectrum would be well served to support the needs of small business for quality and affordability, and to enable innovative models that deliver better options going forward. Growing ICHRA as an option for coverage can be a key element in this effort.
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