Health insurance premiums and related costs are a significant burden for small businesses, and a new study from banking giant JPMorgan Chase finds that many dropped coverage from one year to the next to mitigate the expense.
The report, compiled by the JPMorgan Chase Institute, found that about a third of small businesses canceled their coverage between 2018 and 2019, a finding that held true for firms with employees and those without paid workers.
For example, 36% of nonemployer firms in the construction industry discontinued coverage between 2018 and 2019, as did 34% of those with employees. The largest share was in the restaurant industry, with 38% of nonemployer firms and 36% of employer firms axing coverage.
The study also examined these trends post-pandemic, and while the number of small businesses that eliminated their insurance was lower, the finding generally held for both employer and nonemployer firms.
“They’re really trying, as far as we can tell, they kind of just manage this trade-off,” Chris Wheat, president of the JPMorgan Chase Institute, told Fierce Healthcare. “You’ve got to make some choices. Some of them are making that choice to move away from having health insurance.”
Cost is the largest factor in these decisions. Previous research conducted by the bank found that the businesses with the largest health insurance burdens were the most likely to discontinue their premiums.
In the new study, the researchers found that a 10 percent point increase in insurance burden grew the likelihood that these firms would choose not to continue with coverage.
Most businesses also continued to operate after discontinuing their health insurance, according to the report.
Morgan Health, the bank’s healthcare-focused division, also released a study that seeks to establish strategies that small businesses can use to mitigate the costs of healthcare and offer coverage to their workers.
For one, the report highlights that offering health insurance is a value-add for these smaller companies, especially as workers expect it as an offering regardless of the size of their employer. It is also commonplace for employers to make necessary tradeoffs to ensure there is continuity of coverage, including limiting hiring or managing expansion plans.
Small businesses also rely heavily on insurance brokers, though they do spend a significant amount of time on their own conducting research and vetting potential partners. New innovations, such as individual coverage health reimbursement arrangements, or ICHRA, hold promise in addressing these expenses but small businesses have expressed concern about the implementation or administration of these offerings.
Molly Chidester, an executive director at Morgan Health, said one of the goals of research like this is to help alleviate those fears so these firms have an easier time finding a path that works for them.
“We’re trying to help them get questions answered, be aware of those other innovative solutions that are out there, so that they don’t have to make some of these hard trade-offs,” she said.