Blog: Kentucky Small Businesses Feeling the Impacts of High Healthcare Costs - Hospital Consolidation and State Policies are Making Things Worse

A new study from JP Morgan Chase is shining a light on the stress small employers are feeling.  12% of payrolls went to health care costs for small employers, compared to 7% for larger businesses.  Firms with fewer than 10 employees paid the highest premiums.

·       Why it Matters? 99.3 percent of Kentucky businesses are small businesses, employing nearly half of the state's private workforce.

Cost of care is rising and hospital consolidation is making it worse

·       Kentuckiana Health Collaborative (KHC) notes, “the evidence indicates that hospital prices are the leading driver of rising healthcare cost for employers and employees in Kentucky. One reason is market consolidation.”

·       KHC points to Louisville, where three large hospital systems effectively control all of the acute care inpatient beds in the metropolitan area.

·       In fact, “the city is well above the national average for market concentration. Like most other metro areas, Louisville’s inpatient hospital market has become increasingly concentrated over the past decade.”

·       The National Bureau of Economic Research found a 1% increase in prices driven by hospital mergers results in a .4% decline in workforce and nationwide, Nationwide, hospital mergers increase the average hospital price by 6-18%.

The burden of high health care costs often forces small businesses to:

·       Cut back on wages

·       Delay expansion plans

·       Reduce workforce or hours

·       Eliminate coverage

This financial strain not only impacts the businesses but also the Kentucky economy at large. When small businesses struggle, the communities they serve feel the effects, from decreased job opportunities to lower local spending.

Kentucky policy is also flawed

·       Kentucky lawmakers continue to break new records each year on the number of health mandates introduced each legislative session.

·       While often well-intend­ed, government mandates typically result in higher premiums and can reduce access to care.

·       According to the Kentucky Department of Insurance mandates statements, mandates passed in the 2024 session will cost a family of four over $1200 a year in additional yearly premiums.

·       Kentucky already has more mandates than the national average

·       Mandates dictate what coverage insurers can sell and what coverage consumers can buy as they relate to specific treat­ments, benefits, and providers.

·       Small businesses pay the price for government overreach because they do not have the resources to self-insure and lack bargaining power in the market to achieve lower health insurance premiums.

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