A good first step toward making something more affordable is to stop making it more expensive. That’s especially true when it comes to health insurance.
As an organization representing more than 1,700 small businesses across the Granite State, we know the challenges that Main Street employers face when offering health coverage to their employees.
Every four years, the National Federation of Independent Business surveys its members on their biggest problems and priorities. For nearly 40 years, our members have ranked the cost of health insurance as their top challenge.
For small employers, health insurance is a crucial benefit for recruiting and retaining workers. Due to structural disadvantages in how health insurance markets are regulated at the state and federal levels, small businesses that purchase employee coverage in the small group market generally pay more for coverage than larger competitors who can self-insure.
In New Hampshire, rising healthcare costs have taken a toll on small businesses. Between 2018 and 2023, small group premiums increased by 20 percent, and enrollment declined by 16 percent. Large group enrollment has steadily declined over the same period, largely due to rising premiums.
Unfortunately, the problem will get worse if a new health insurance tax becomes law this year. A provision included in the New Hampshire Senate’s budget proposal would tax private health coverage to fund youth mental health services under a state government program.
There is no disputing the type of care at issue is a serious matter; the question is how to pay for it and who should provide it.
This uncapped tax would add to the already heavy financial burden for small employers, would increase premiums for workers and their families, and is completely misplaced.
The New Hampshire Insurance Department correctly notes in its analysis of the proposal that higher health insurance taxes will “exert upward pressure on premiums and increase costs for self-funded plans” and could “cause consumers to purchase cheaper, less benefit-rich plans or forgo the purchase of health insurance altogether.”
In simpler terms, that means you’ll pay more for health insurance. And when people have to pay more for something, fewer people will buy it.
It doesn’t take much to reach that tipping point. For every one percent increase in health insurance premiums, there’s a four to six percent reduction in demand for individual and family coverage, according to a study published in The Journal of Private Enterprise (2009).
Moreover, state and federal laws already require commercial health insurance to cover a wide range of mental health services for everyone with coverage.
Despite already offering similar services through accredited providers, the proposal would raise taxes on private, employer-based insurance to pay for services from two specific providers through a government program that serves few, if any, people with private insurance. Not only will the tax increase premiums, but it also undermines one of the few tools available to employers to control the cost of care and insurance.
Trying to fix one problem by making another one worse just doesn’t make sense. If funds aren’t available within existing state resources, lawmakers should look to those known to be responsible for the increase in mental health issues, like social media companies, not small business owners and employees already struggling to afford coverage.
Making matters worse, some lawmakers want to add to New Hampshire’s already lengthy list of state-mandated health coverage requirements. Coverage mandates make health insurance more expensive and force many people to pay for equipment, tests, and services they will never need or do not want.
Academic research finds each mandate increases the cost of small business premiums by nearly one percent, while industry analysts report the impact of certain mandates can raise prices by up to 10 percent. State officials estimate that one of the mandates could cost up to $12 million per year.
Mandates also widen the health insurance affordability gap between small and large employers. Larger employers with federally regulated self-insured coverage are exempt from these state mandates, while smaller competitors get stuck with higher costs.
When politicians demand that health insurance do everything for everyone, it becomes affordable for no one.
We hope lawmakers will reject proposals that make it even harder for small businesses and workers to afford health coverage.