A recent Wall Street Journal article highlights the cost increases in various insurance lines that small businesses face, and the cutbacks that have to be made to keep afloat.
Rising insurance costs represent the greatest source of pain for small businesses, the article states. Forty-two percent of small business respondents to a survey by Vistage Worldwide for The WSJ said they are seeing increases of 10% or more for insurance.
“Roughly half of small business owners said health insurance costs increased by 10% or more this year, according to a survey of about 800 entrepreneurs conducted in June for The Wall Street Journal,” the article says. “Nearly 1 in 10 reported increases of 25% or higher.
“At Jay-Hill Repairs, insurance premiums for health, auto, and liability coverage jumped by an average of 20% this year, well above the 9% to 12% increase the company was expecting. To keep costs in check, the Fairfield, New Jersey company switched health insurance carriers and recently turned down three otherwise qualified job candidates with spotty driving records that could have resulted in higher auto insurance costs.”
Other types of insurance have grown more expensive due to extreme record-setting weather and vehicle repair costs. Repair costs are on the rise, in part, because of the complexity of advanced driver assistance systems (ADAS), the need for pre- and post-scans and calibrations, and working with other high-tech and/or expensive features and components.
The article cites recent research by JPMorganChase Institute which found that healthcare expenses made up nearly 12% of payroll expenses for firms with less than $600,000 in revenue compared to 7% for small businesses with revenue greater than $2.4 million. The study looked at about 1,900 small business health insurance premium payments from 2018-2023.
The study notes more than 94% of small businesses in the U.S. have 1-49 employees, and 54% have fewer than five employees.
“Smaller firms with fewer employees may be less able to negotiate favorable insurance premiums compared to their larger counterparts,” the study states.
Gary Claxton, a senior vice president with health policy research organization, KFF, told WSJ the best way for businesses to lower standard insurance plan costs is to opt for a smaller network of providers, raise deductibles, or otherwise trim coverage.
Some small business owners are opting to continue offering the best coverages they can because, without doing so, they fear they would struggle to remain competitive in today’s job market.
“We’re competing with the government for the labor pool. I have no choice,” said Shane Belcher, co-owner of Lyons Lumber, in the WSJ article. “Being a small company, we have to offer quality insurance if we want to attract quality people.”
However, he added that the higher costs paired with weakening sales might cause hiring delays to fill open positions, forcing the company to operate with a smaller staff.
The results of a survey conducted in 2023 by the Society of Collision Repair Specialists (SCRS) and I-CAR found that only around 15% of the 839 technician respondents were offered health insurance and/or paid time off at the time.
An example of recent steep insurance increases comes from Blue Cross and Blue Shield of Rhode Island. BCBSRI has requested a 14.3% increase to 2025 premiums in its individual market plan for residents who don’t have insurance through their employers.
Small group insurance requests ranged from 8.8% to 22.7% from BCBSRI, Neighborhood Health Plan of Rhode Island, UnitedHealthcare, Harvard Pilgrim Health Care of New England, and Harvard Pilgrim Health Care Insurance Co.
Attorney General Peter Neronha wrote in an Aug. 2 statement that the state’s insurance commissioner shouldn’t approve the increase.
“[W]hen you consider that BCBSRI has sought and received a combined 21.6% increase since 2019, we’re now looking at nearly 40% in seven years,” he said. “This premium increase is staggering, unfair, and certainly does not reflect enhanced accessibility… Health care in Rhode Island is in desperate need of systemic reform. Unless and until this changes, I will not support significant insurance rate increases.”
The AG conducted an independent review of the rate filings and offered his recommendations to OHIC,
If approved, more than 17,600 Rhode Islanders enrolled with BCBSRI would be affected, likely including small businesses. Between 2019 and 2022 the average approved rate by OHIC in the individual market was 3.4%, according to The Providence Journal.
BCBSRI’s rate increases are due to soaring drug costs and nationwide higher use of medical services post-pandemic, according to a statement provided to The Journal by the insurer’s spokesperson Rich Salit.
“In 2023, BCBSRI’s claims for medical services increased $85 million from the previous year while claims for pharmaceuticals jumped $75 million, resulting in an operating loss of $26 million,” Salit wrote, according to The Journal. “The elevated health care cost trends have continued into 2024. BCBSRI is committed to leading access to high-quality, affordable, and equitable healthcare.”
Through SCRS, collision repair businesses are offered up to 20% in savings versus renewals and employees can use coverage as soon as they enroll. Coverage is available to employers with as few as two employees.
Benefits include:
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- $0 deductibles and employees choose their out-of-pocket maximum, which ranges from $3,000-$7,000;
- No-cost services for visiting primary care physicians, specialists, urgent care, labs, or having X-rays;
- Free generic prescriptions and mental health services; and
- Aetna and Cigna networks.
Details about the plans offered can be found in the SCRS benefits center.
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.