Is Healthcare Too Expensive for Small Businesses?

According to the Minnesota Department of Health, over the last 8 years, the number of groups enrolled in small group health insurance has significantly declined. In 2015, 293.8K small groups enrolled in full coverage healthcare plans. In 2023, 200.1K enrolled in group coverage. These are the latest statistics available. This is obviously a significant decline, but is “cost” the primary factor? Or is there something more severe happening?

THE MATH & SCIENCE OF IT ALL

A theoretical conclusion could be made that COVID-19 exposed a lot of things that may have been previously overlooked when it comes to expenditures. Healthcare may have been one of those things. Especially for small businesses trying to make it by during those tough times.

This may have led to small groups ridding of healthcare for their small groups as an overhead expense that they never really understood and, quite frankly, they weren’t required to have. Without the proper understanding or direction of healthcare, when cutting back on production and inventory, healthcare may have been something from that point on that was not as crucial as one may have thought. But that doesn’t correlate. What about the decline from 2018-2019? Prior to COVID-19? Also, you cannot possibly justify that healthcare isn’t important in any regard no matter the year. From an “understanding business” standpoint, healthcare could be the most crucial component of the success of your business just outside of sales. Read our blog post for more on the importance of healthcare as a small business. There is actually a rather simpler answer.

The costs of insurance premiums for members have increased each year from the year 2016 until now. There was a 12.3% change in premium cost in 2018 from the year 2017 according to the Minnesota Department of Health. Premiums per member went from $5.0K to $5.6K. This is actually a significant change. The cost of premium is now $7.0K for each member.

So who’s to blame? Well, there isn’t particularly “one person” or body to blame. It’s all systematic and a cycle that has caused premiums to skyrocket. The acquisition of medical equipment, medications, supplies to manufacture medical equipment, disruptions in productivity– especially during COVID-19, and costs to obtain minerals and elements of pharmaceutical drugs have all played a role in helping the health industry outpace inflation. Which has always been the case, but recently, the amount required to spend to obtain all these necessities for pharmacies, hospitals and other health/medical industries to operate at full capacity to maintain health standards and beyond continues to rise. According to CMS and the National Health Expenditure Accounts (NHEA), U.S. Healthcare spending has increased by 7.5% (2023).

But we’ve spent too much time focusing on the problem, so what’s the solution? Especially for you as a small business owner?

CHESS, NOT CHECKERS

While the health industry tries to find a way to better service healthcare, JHN FINANCE has a rather simple solution for you.

First and foremost, there should be a complete admission that there is a problem in the cycle. But is it a “problem”, or is it simply… “What it is?” Think about it this way: if you feel you have the hottest product or idea on the market, you’re going to charge more, right? Let’s try this another way: A gourmet burger from your favorite local restaurant usually costs more and tastes a lot different from a major fast food chain, right? The supply chain is much tighter and as a small business or restaurant owner in this example, you can manage, much closer, any issues or changes you want to see to increase productivity and overall quality of your product for your consumers. Over time, the demand for that product increases, meanwhile, the costs for that product maintains or increases depending on factors like the cost to maintain and obtain necessary assets to produce serviceable results. So you have to find a way to increase production all the while maintaining quality at a scalable pace. All these things apply to the health & medical industry as well. We all are aware of technological and medical advancements over time. This just means that our technology and medicines continue to improve, and with that, the “next big thing” will always exist at a different price point. So is this really a bad thing? Or are we simply ill-equipped and not “playing the game” correctly?

We have to change our perspective on rising healthcare costs. While we may be required to spend more, we have to understand and learn that the problem isn’t the expense as a whole, but rather the allocation of expense. This is more important now than it’s ever been. “Why? Costs will always increase.” That may be true, but the modern boom of the small business industry may never be replicated like it exists today.

According to The Missouri Economic Research and Information Center, Small businesses in Missouri currently make up 45.6% of the economic workforce. 79.8% of those businesses employ less than 10 employees. That’s just Missouri, one of the larger markets in the U.S. for small business. All sources state that there are 33.2 million small businesses in the U.S. There’s no real evidence to suggest this will increase from what it is now; small businesses already make up 99.9% of our workforce economy. These are businesses with 500 or less employees. According to the U.S. Census Bureau, over 5 million of those businesses housed 1-19 employees.

So the approach needs to change for success. Firstly, insurers will need to increase benefits not directly associated with the services their products provide. You see a lot of this with Medicare & Medicaid. Companies are attaching gym memberships and subscriptions along with their insurance product to increase enrollment and supply more via incentive for the costs of the plans. Additionally with this, insurers will need to direct cash assets or increase equity on-hand to increase the number of suppliable benefits attached to their products. A discussion for another day.

For you today,  small businesses will need to start allocating their funds better by relegating to those whose purpose is to make sure we are getting the most bang for our bucks. This isn’t a ploy to get you to spend money with JHN Finance, or a ploy to get you to spend more than you will eventually have to spend anyway. This is the way it needs to be. You’ll have to start relying on your insurance broker more to find you the best deal possible for your business in your area. We often want to skip over steps of the process, but the engine cannot run without a motor. Your broker’s job, those not exclusive to specific insurers, or providers, is to find you the best quality product for your situation. If you skip this process, you’ll only be left with frustration, and why you were sold the best possible product that an insurer offers versus what product is most suitable for you and readily available for you in your area.

Trusting the “Right” Professional

Who should you be trusting as a professional? No one is ever going to have all the answers. But a lot of times, we choose the wrong professional by expectation of the amount of immediate answers received, and also, the wrong professional will claim to have all the answers. That’s the incorrect approach. The “Right” professional should have a substantial amount of more questions than answers. Knowledge stems from the ability to have the understanding that you do not have all the answers, but you know how to search for answers. Knowing who you need to speak to for answers, and where you need to go to gather the necessary information for a particular situation. These professionals should always be researching and seeking more information. These sentiments are highly more important than immediate answers.

Secondly, ethical practices. Does your professional put you and your company first above themselves and their business partners? Are you the priority? There will be signs along the way in communications or presentation.

These standards apply to your doctor, your pharmacist, your physician, your broker, your insurer and anyone who assists you with your healthcare. Come in with questions, and expect your professional to seek more information for you rather than tell you what you would like to hear right then and there. Here, you’ve found a reliable partner for your small business, and you’re on the path to success as a small business.

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