Small Employer Payrolls Suffer from High Health Care Costs

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By: TAHP | Thursday, June 27, 2024

What’s new: Texas families and employers continue to struggle with the cost of health care, and a new analysis of small businesses shows the problem may be worse than previously understood.

By the numbers: According to data from JP Morgan Chase business accounts, 12% of payrolls went to health care costs for small employers, compared to 7% for larger businesses.

  • That’s likely why Texas small employers have ranked the cost of health care as their number 1 issue since 1986, according to the NFIB.
  • Employment overall suffers from higher costs, with a new report from the National Bureau of Economic Research showing that a 1% increase in prices driven by hospital mergers results in a .4% decline in workforce.

Why it matters: The price of health care services is driving higher spending and employers are looking for answers to control those costs. Small employers are uniquely sensitive to higher prices and 75% of small businesses that don’t offer coverage say employees would prefer pay raises over benefits.

Texas laws are worsening the problem: Small employer health plans are regulated by state laws passed at the Texas legislature, unlike large business self-funded health benefits that are exempt from state mandates. In recent legislative sessions, Texas elected officials have imposed a spree of new mandates.

Breaking down the mandates: Between the last two legislative sessions, legislators have imposed a stunning 23 new mandates on employer provided health insurance.

  • Texas is ranked 3rd for mandates that go beyond the Affordable Care Act, making it harder to offer affordable health benefits.
  • State laws block insurance plans that encourage patients to shop for lower priced care, reward doctors that focus on value, and share quality transparency with patients.

Texas can do better for small businesses:

  • Moratorium on Mandates: Texas needs a moratorium on mandates until a process is in place to produce an actual mandate fiscal note on private market coverage impact.
  • Upfront Cost Estimate for Mandates: 29 states have a transparent process to review the cost of mandates upfront. Texas lacks a process to estimate the cost of mandates to employers and families before imposing new regulations and requirements.
  • Modernize the Market: Employers want flexibility to offer innovative benefits that reward high value care and encourage patients to be smart shoppers. State regulations stand in the way.
  • Fight Back Against Out-of-Control Prices: Patients need a complete price picture with honest billing, shoppable info, and transparency in ownership, including private equity’s health care takeover.
  • Stop Surprise Facility Fees: Hospital system consolidation has left patients with new surprise facility fees added when doctor’s offices and medical services are bought up and billed as if they occurred at a hospital. Texas should require honest billing and put limits on abusive facility fees.
  • Address Fraud, Waste, and Abuse: As much as 10 percent of all health care expenditures are attributable to fraud, waste, and abuse, and physicians report that 30% of procedures are unnecessary.
  • Protect Employer Flexibility: Employers are leading with innovation and Texas should reject attempts to regulate self-funded (ERISA) employer health plans.

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