What's Happening?
Small to medium-sized businesses (SMBs) in the United States are experiencing significant increases in healthcare costs, with health insurance premiums rising sharply. According to a report by Gusto, a payroll
and HR solutions provider, the median health insurance premiums at small businesses have increased by 23% over the last three years, surpassing the inflation rate by 13%. This trend is particularly pronounced in organizations with five or fewer employees, where premiums have outpaced inflation by 18%, reaching approximately $8,500 per employee this year. Despite these challenges, nearly a quarter of SMBs continue to offer health insurance, maintaining a steady rate of coverage. The median employer contribution has slightly decreased from 70% to 68% over the past three years. Many SMBs are adopting health savings accounts (HSAs) to manage costs, with nearly 48% offering HSAs to employees, up from a third five years ago.
Why It's Important?
The rising healthcare costs present a critical challenge for SMBs, which employ roughly 46% of Americans. The ability of these businesses to offer affordable health benefits is essential for attracting and retaining talent, making it a national priority. Health insurance is a core component of employee compensation, and the increasing costs could impact the competitiveness of SMBs in the labor market. The adoption of HSAs and other creative plan designs by SMBs highlights their agility in addressing these challenges, offering valuable lessons for larger employers. As healthcare costs are expected to continue rising, the strategies employed by SMBs could influence broader industry practices and policies.
What's Next?
As healthcare costs are projected to rise further in 2026, SMBs may continue to innovate in their approach to employee benefits. This could involve expanding the use of HSAs, defined contribution plans, and tiered options to provide more flexible and cost-effective coverage. Larger organizations might also look to SMBs for insights on managing healthcare expenses while maintaining employee satisfaction. Policymakers and industry leaders may need to address the underlying factors driving these cost increases to ensure the sustainability of health benefits for SMBs and their employees.
Beyond the Headlines
The rising healthcare costs for SMBs could have broader implications for the U.S. economy and workforce dynamics. As these businesses adapt to financial pressures, there may be shifts in employment patterns, with potential impacts on job creation and economic growth. Additionally, the emphasis on HSAs and other savings mechanisms could lead to changes in how employees manage their healthcare expenses, influencing consumer behavior and financial planning.
