American Small Business Owners Feeling The Pinch From Surging Health Care Costs

Soaring health care costs are placing major financial strain on American small business owners.

The ability to afford health care has emerged as a key concern across the nation ahead of November’s midterm elections. Several analysts told the Daily Caller News Foundation that some Main Street businesses are struggling due to skyrocketing health costs, including having to scrap bonuses, facing difficulty hiring new employees and conducting layoffs.

Many small businesses have had to reduce employee hours amid rising health care affordability concerns, according to Tyler Dever, principal of federal government relations for the National Federation of Independent Business (NFIB).

“Small businesses are being squeezed by the rising cost of health care, forcing small business owners into an impossible dilemma,” Dever told the DCNF. “They can either absorb higher premiums and cut back elsewhere — such as reducing hours, laying off workers, or eliminating bonuses — or drop health coverage altogether, which would put them at a disadvantage when competing for talent.”

Dever also claimed President Donald Trump’s administration could help bring down health care costs by “expanding access to more affordable [health care] alternatives outside the traditional small group market.”

“One immediate step the Administration could take today is restoring and extending Short-Term Limited DurationInsurance, which was previously available for up to three years but shortened by the Biden administration in an effort to drive more people to the Obamacare marketplace,” Dever said.

“Other efforts, such as codifying the 2019 [Internal Revenue Service] rule that created Individual Coverage Health Reimbursement Arrangements, removing barriers for small businesses to join Association Health Plans, and expanding the eligibility rules on HSAs would have to be accomplished by Congress,” he added. “We are hopeful the president will throw his support behind expanding health options in a reconciliation bill this Congress.”

Established under the Congressional Budget Act of 1974, reconciliation provides a fast-track process for considering specific legislation related to taxes, government spending and the debt limit, according to the Center on Budget and Policy Priorities.

Dever also asserted that “for small businesses trying to offer meaningful benefits, having access to a broader range of coverage options would provide much-needed flexibility and more workable solutions.”

Nearly half of U.S. small employers (49%) have reported taking a lower profit or suffering a loss to afford health insurance premium increases over the past 5 years, according to an NFIB survey released in March 2023. The survey also found that 98% of small businesses currently offering health insurance worry the cost of providing it to their employees will become unsustainable over the next five to 10 years.

After payroll, health insurance notably represents the largest expense for small businesses, CNBC reported. The median health insurance premium for U.S. small employers has climbed 23% since 2022, outpacing inflation by 13% over that time period, Gusto reported in November 2025.

For American small businesses that do not offer health insurance, 65% cited cost as the top reason, according to a JPMorgan Chase report published in June 2024.

Many small business owners have recently had difficulty making key investments in their companies and hiring new workers due to climbing health costs, according to Alexis D’Amato Falvey, senior director of federal government affairs at Small Business Majority.

“Small Business Majority’s research has found that the high cost of health care is forcing many small businesses to make difficult decisions,” Falvey explained. “In fact, nearly half of business owners said high health care costs are making it difficult for them to invest in their business, while 31% said high health care costs make it difficult for them to attract and hire new employees.”

“Among business owners that do have coverage, over 71% say that their health care premiums have increased this year,” he added. “While many discussions have taken place in Congress revolving around making health care more affordable, results remain slim, and an overwhelming majority, 78%, of entrepreneurs believe that policymakers have not been effective at all in addressing rising health care costs for small businesses. Thirteen percent said they’re anticipating closing their business to get health insurance through an employer.”

The Trump administration “should continue to direct Congress to pass legislation that would increase hospital price transparency, foster greater competition in health care,” Falvey continued. He also claimed that many small business owners cannot afford to offer their employees “robust” medical benefits due to rising costs.

“Health care has become the biggest cost for small businesses after payroll, and the reality is that even though many small businesses want to offer robust health benefits, most cannot afford to do so,” he said.

Falvey also called health care a “barrier to entry for many aspiring small business owners.”

“In fact, we’ve heard from numerous entrepreneurs over the years who said that they were afraid to start a business because they would lose their health care coverage, or they were only able to start a business because they could continue coverage through their spouse or partner,” he noted. “Access to health care should not be a barrier to small business ownership or employment but it will be for as long as health care costs continue to rise.”

“As long as health care remains unaffordable, small businesses will continue to compete on an uneven playing field because they’ll be priced out in the race for top talent,” he added.

John Goodman, a senior fellow at the Independent Institute, told the DCNF that he thinks it would help bring down the cost of medical services “by allowing insurers in the [Obamacare] exchanges to post reference prices which can be used at any provider instead of a narrow network of providers.”

“This approach has been shown to dramatically cut costs and improve access to care,” Goodman noted.

In 2023, about 49% of U.S. employees at small firms worked at establishments that offered health insurance coverage, according to The Commonwealth Fund.

A Gallup survey published on March 31 found that the majority of Americans, 61%, said they worry “a great deal” about being able to afford health care. Moreover, Democrats have historically had an edge over Republicans on the issue of health care, KFF reported on April 2.

In early April, Trump slapped tariffs on patented pharmaceuticals and their ingredients in an effort to “bolster American national security and public health,” according to a White House fact sheet. The president had unveiled a new health care plan in January which aims to promote competition, slash wasteful spending and put consumers “back in control.”