Introduction
As we approach 2024, individuals and businesses alike are bracing for a significant shock on the healthcare front. The cost of employer-provided health insurance is slated to rise by approximately 6.5 percent, marking what could be the most substantial increase in over a decade.
Data from Mercer and Willis Towers Watson, two benefits consulting firms, have shed light on this concerning trend, according to a report by The Wall Street Journal.
The surge in costs is attributed to various factors, including rising labor expenses at hospitals and increased spending on medications like Ozempic for weight loss and diabetes treatment. These developments have significant implications for both employees and business owners.
The Rising Tide of Health Insurance Costs
For employees and their families, the implications of this cost surge are substantial.
Annual family premiums for employer-sponsored health insurance already averaged a staggering $22,463, with employees contributing roughly $6,106, and employers covering the remainder, as per a 2022 survey by the Kaiser Family Foundation.
With the impending cost increase in 2024, these expenses are expected to place even greater financial strain on workers and their employers.
Small Businesses Face an Uphill Battle
The impact of rising health insurance costs is especially challenging for smaller businesses. A substantial portion of them is already struggling to offer health insurance to their employees.
According to an April survey by the National Federation of Independent Business (NFIB), just over half of small employers currently provide health insurance. Additionally, 98 percent of these employers express concerns that maintaining such offerings will become unsustainable over the next 5 to 10 years.
Among those that do not offer health insurance, 65 percent cite the prohibitive cost as the primary barrier.
Competitive Challenges and Workforce Retention
The rising cost of health insurance creates a competitive disadvantage for smaller businesses, as 63 percent of employers believe this offering is either very or moderately important for recruiting and retaining employees, based on the NFIB report.
Despite a softening labor market, characterized by the lowest number of job openings since March 2021, smaller employers still struggle to find qualified applicants. Health insurance is a highly sought-after benefit in today’s job market, and its increasing costs only add to the challenge.
Legislative Solutions for Small Businesses
To address these issues, some advocates of small businesses are pushing for legislative solutions.
The Choice (Custom Health Option and Individual Care Expense) Arrangement Act aims to provide small businesses with greater flexibility by allowing them to reimburse employees for purchasing their own health insurance on the individual market.
This legislation has garnered support and was introduced in the House of Representatives by Kevin Hern (R-Okla.), passing in the House in June.
Navigating the Road Ahead
Business leaders must consider various strategies as they prepare for the 2024 health insurance landscape.
One option is to increase the deductible for health insurance plans, which can lower premiums and shift more of the financial responsibility to employees. However, this approach carries risks, as some insurance providers require a certain percentage of employees to participate in the plan. With less attractive coverage, employee participation may decrease.
Another potential response is for small businesses to forgo offering health insurance entirely, provided they have fewer than 50 full-time employees or equivalents, in accordance with the Affordable Care Act. In such cases, business leaders can explore alternative benefits, such as greater workplace flexibility, discounted services or products, and higher wages, to remain competitive and attract talent.
Ultimately, the right approach may vary from one company to another.
Business owners are encouraged to maintain open dialogues with insurance agents and connect with other business leaders of similar sizes and demographics to explore the full spectrum of available options. In the face of rising health insurance costs, staying informed and adaptable is crucial for the well-being of both businesses and their employees.
