Small Business Health Insurance: Rising Costs Threaten Coverage | EBRI Findings

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Small Business Health Insurance Coverage at Risk as Costs Rise: EBRI

By Rebecca Pifer
| January 23, 2026

• Health insurance remains the dominant form of coverage for working-age Americans.
• The share of employers offering health benefits slightly increased in 2024, but gains were concentrated among large companies.
• Small businesses are struggling with rising health insurance costs,potentially leading to fewer offering coverage.
• Large employers may shift costs to employees through higher deductibles and restricted networks.
• The average cost of employer-sponsored health insurance is projected to continue rising considerably.

Despite a slight uptick in overall employer-sponsored health insurance, a concerning trend is emerging: small businesses are increasingly pulling back from offering health benefits to their employees. Approximately 60% of the nonelderly population relies on employment-based health insurance, according to a recent report from the Employee Benefit Research Institute. However, this stability is threatened by the financial pressures facing smaller employers.

Coverage Gains Limited to Larger Companies

In 2024, 49% of employers provided health coverage, a small increase from 46.3% the previous year. But the research revealed a crucial distinction: these gains were almost entirely limited to large employers – those with more than 100 employees. Coverage rates actually decreased among smaller businesses.

“The overall percentage of employers offering coverage is heavily influenced by the fact that small employers are in large part responsible for the decline in coverage, and most employers in the U.S. are small,” the Employee Benefit Research Institute found.

Financial Strain on Small Businesses

Paul fronstin, director of health benefits research at the Employee Benefit research Institute, cautioned that escalating health insurance premiums could worsen the situation. “If health insurance premiums rise faster than wages and general inflation, small employers are likely to face intensified financial strain, which could accelerate the erosion of health plan sponsorship among firms with fewer than 100 workers,” Fronstin said in a statement.

What happens if premiums continue to rise? small businesses may be forced to drop health insurance coverage altogether, leaving employees to seek alternative options.

Shifting Costs to Employees

Large employers aren’t immune to the rising costs, but they may respond differently. Fronstin suggested they might shift more of the financial burden onto employees through higher deductibles, increased coinsurance, or more limited provider networks.

“That could preserve offer rates but reduce the value of coverage, potentially lowering take-up. For workers, the impact could be significant, meaning higher out-of-pocket costs, greater reliance on public programs and increased financial insecurity tied to