HDHP Enrollment Slipping: What It Means for Employers
April 29, 2025
A new poll has found that most small and mid-sized enterprises consider offering group health insurance benefits to their staff a fundamental business value, despite many firms making difficult financial tradeoffs to maintain that coverage.
It’s been well-reported that SMEs are disproportionally burdened by rising health insurance costs and a labor market that demands robust benefits. A study by Morgan Health, a unit of JP Morgan, found that one-third of SMEs drop their health insurance each year, but the ones that stay the course must be nimble and sometimes make choices that allow them to continue offering health insurance.
The goal of the survey was to better understand how businesses make tradeoffs to keep health care coverage in place and areas where they need additional support or innovation.
Here’s a look at how most SME operators view their role in group health benefits, the challenges they face and steps they are taking to provide benefits and improve their offers.
Firms, staff value health coverage
Most SMEs polled said they consider group health insurance a fundamental part of their benefits package to stay competitive in the job market.
The challenge facing these firms is balancing the cost of group health insurance against the financial benefits of attracting the best and brightest. SMEs often struggle to match the expansive benefits choices of larger employers who usually have more resources to offer wellness programs, mental health benefits and virtual care.
As a result, SMEs will often prioritize their employees’ well-being and happiness as part of a family-like company culture to set themselves apart from larger employers. This focus can positively affect employee satisfaction and business performance, even if that means absorbing other costs.
Financial tradeoffs
A separate report by JPMorganChase Institute found that one out of three small businesses discontinue paying health insurance premiums from one year to the next. However, many executives polled by Morgan Health said that prospect would be the absolute last option.
One executive of a firm with between 100 and 500 employees told the surveyors, “There would have to be a lot of cuts made in our budget before we would [discontinue benefits] … I think that would be one of the last things on the chopping block.”
Dropping coverage is only an option for firms with fewer than 50 full-time and full-time equivalent employees. Employers with 50 or more of these workers are required under the Affordable Care Act to offer group health insurance to their staff that is affordable and covers essential services.
Employers may take other steps like:
- Reducing family plan contributions (not always popular).
- Shifting to a high-deductible health plan, which in turn lowers the premium. On the flipside, your employees will have higher maximum out-of-pocket expenses. This can include promoting health savings accounts, which allow employees to save for future medical expenses with pre-tax dollars. HSAs can only be tied to an HDHP.
- Choosing a plan that doesn’t cover doctor office visits or prescription drugs until the deductible is met.
- Selecting a carrier with lower rates even though you may sacrifice network availability.
- Offering an individual coverage health reimbursement arrangement. These are basically accounts that the employer funds to allow their staff to purchase health insurance in the private market or on an ACA marketplace.
The takeaway
A word of warning: Making big changes to save money can result in unintended consequences. As a result, considering a big change requires research, which takes time and money. Large employers will usually have a dedicated human resources team that can do the research, but SMEs, not as much.
We can help you evaluate your options, stay competitive in the talent market and retain key personnel. As your strategic partner, we can work with you to manage your health insurance costs and explore new options as the market continues to evolve.
