How are health insurance premiums burdening small businesses, according to a new report from JPMorgan Chase?

A new report from JPMorgan Chase provides insight into how health insurance premiums are affecting some of the smallest businesses in the United States.

The analysis, released Wednesday, was based on de-identified data on small businesses that had deposit accounts with Chase Business Banking and met the "active and small" criteria. Businesses also had to have proof of regular electronic payments for health insurance premiums.

About 81% of small businesses in the U.S. have no employees and must purchase health insurance for themselves and their families in the individual market if they do not have coverage from another source. These businesses are referred to as "small businesses that are not employers" in the analysis.

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According to the analysis, health insurance premiums are an increasing share of the operating expenses of nonemployer businesses, although "tax incentives may be holding back premium growth for some." Over the past five years, health insurance premiums for non-employer businesses have increased by 19%.

JPMorgan Chase also found problems with companies with fewer than 50 employees, especially those with lower revenues. Unlike companies with 50 or more employees, businesses with fewer than 50 employees don't face penalties if they don't offer health insurance benefits. However, they may still choose to do so "as part of a competitive pay and benefits package for their employees," the report says.

For small companies with annual revenues of less than $600,000, the median burden of paying for health insurance was about 12%. For companies with annual revenues of more than $2.4 million, the burden was 7%. The report also found that premiums for these businesses have increased 33% over the past five years.

"[Small] businesses are struggling to pay the cost of health insurance. And it's getting worse every year. It's taking an increasing portion of their costs compared to large employers," Dan Mendelson, CEO of Morgan Health, said in a recent interview. Morgan Health is the employer insurance arm of JPMorgan.

The findings come at a time when about half of Americans receive health insurance through their employer, and more than 27% of private sector workers in 2023 will be employed by businesses with one to 49 employees. In addition, rising health care costs have become a major challenge for all employers, large and small.

Based on JPMorgan Chase's analysis, Mendelson emphasized the importance of "developing more cost- and quality-sensitive products for SMBs." He also said that SMBs must prepare for future health care costs and that brokers must better serve small employers.

"I think SMEs really need to find out what's going to happen in the future to prepare, because you can't just turn around on the spot if you're waiting," he said.

"I think another implication is that brokers really aren't serving SMBs the way they need to," he continued. "Brokers get paid to sell standard commercial insurance products, and that's what they do. And they do it well. If the standard product is not in the best interest of SMBs, there is a conflict, and we also have a vested interest in resolving that conflict."