The Crushing Weight of Health Insurance on Tennessee Small Businesses

In today’s fluid economic landscape, small businesses in Tennessee are facing an increasingly daunting challenge; the rising cost of health insurance.  

Over the past five years, health insurance premiums have surged by 19% for non-employers ((who pay premiums for themselves and their families) and a staggering 33% percent for small employers, according to data from a recent JPMorgan Chase & Co. Institute report. This escalating financial burden threatens to undermine the vital contributions small businesses make to the Tennessee economy.  

Small businesses are the backbone of our state and nation’s economy with over 9 million Americans self-employed and nearly 35 million – 27% of private sector employees – working in firms with fewer than 50 employees.  

In Tennessee alone, 1.2 million people (or 42 percent of Tennessee employees) work in one of the state’s nearly 665,000 small businesses, according to a 2023 profile by the U.S. Small Business Administration.  

Health insurance benefits are a crucial tool for these businesses to recruit and retain talent. However, as premiums continue to climb, the ability of small businesses to attract and keep employees is increasingly at risk.  

Rising health insurance costs could discourage entrepreneurs from starting new ventures and existing businesses from hiring additional employees. This could slow growth in the sector and diminish its contributions to innovation and economic development.  

For small businesses, especially those with lower revenue streams, health insurance premiums make up a significant portion of compensation costs. The complexity of the U.S. healthcare system adds to the burden. Small businesses must navigate a convoluted insurance market to find suitable plans while also dealing with a complex tax system involving credits and potential penalties. This complexity underscored the need for clear, accessible policies and products to help small businesses manage these increasing costs.  

Compounding these challenges, recent legislative actions in Tennessee have further hampered small businesses’ ability to manage healthcare costs effectively. In 2021 and 2022, the Tennessee General Assembly passed Public Chapter (Pub. Ch.) 569 (HB1398) and Pub. Ch. 1070 (HB 2661), which significantly curtailed health plans and employers’ abilities to control healthcare expenses. These measures have made it harder for small businesses to navigate an already complex and costly system, putting additional strain on their finances and operations.  

What’s more, associations that are supposed to be advocating on behalf of small businesses, like Nashville-based NFIB (The National Federation of Independent Businesses), are actually in-line with legislation driving up employer healthcare costs.   

The answer is simple; policymakers must step up to help small businesses in Tennessee.  

The stakes could not be higher. If we fail to address this issue affecting all Tennesseans, we risk stifling the innovation, growth, and economic contributions that small businesses bring to our state.  

It’s time for policymakers to prioritize the health of our small business by prioritizing the health of their bottom lines.  

About the author: Brittany Snowden is a Human Resources Manager at the Comfort Group with over 14 years of human resources experience and thrives in Nashville by simplifying employee benefits administration.