Survey: Health care costs stymying small business growth in Michigan

• Small business owners say rising health care costs are keeping them from hiring
• Experts say increases stem from 14% increases in drug prices and provider billed services topping 7%
• The business owner warnings come as Michigan’s unemployment rate grows faster than the national average

Rising health care costs could stall job growth in Michigan, as 76% of small business owners say they can’t afford to expand their workforce and insure employees. 

The poll released last week from the Small Business Association of Michigan also found that 83% of respondents said escalating health costs prevent other investments.

Brian Calley, president and CEO of the Small Business Association, said the costs have been a source of frustration for years but owners “just sucked it up and paid.”

Now, he said, “it has reached a level where it is impacting every aspect of a small business: performance, growth, benefit package, investments.”

“Something has to give.”

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Calley’s remarks and the survey coincide with the start of the Detroit Regional Chamber’s Mackinac Policy Conference. Among other groups with a similar message is the Michigan Health Purchasers Coalition, a not-for-profit seeking to lower costs and add transparency to employer-sponsored health care. 

The coalition says that 91% of Michigan residents want elected state officials to act to reduce costs.

“We desperately need everyone responsible for providing health care to come together and identify actionable strategies to reduce the cost of care across the board,” said Sue Tellier, of JetCo Federal in Grand Rapids and a past chair of the small business group.

Health insurance rates have increased over many years, with an average 7% expected this year, compared to the 2.3% annual rate of inflation. Federal analysis points to consolidations among insurers as a reason. 

However, Calley notes that Blue Cross Blue Shield experienced a so-called underwriting loss in 2024, where its claims payments exceeded rate revenues by $1.7 billion.

The losses stemmed from two key areas, Blue Cross told reporters in March: Higher claims billing for medical services that increased 7% and pharmaceutical industry price hikes averaging over 14%.

But with business owners saying job growth is affected, “there’s almost no public discourse about this,” Calley said. 

The $5 trillion US health care industry is a complex web of funding, costs and services. Federal policymakers continue to eye changes in established systems, including proposing cuts to Medicaid and initiating drug price regulation.  And the nation’s insurers saw profitability dip in 2024. 

Connecting health care costs to employment levels in Michigan was eye-opening to Calley, he told Bridge Michigan on Tuesday. 

The small business group included questions about health costs for the first time in its quarterly survey of members. The findings come as the gap widens between Michigan’s unemployment rate and the nation’s average continues to widen, with Michigan reporting a rate of 5.5%, while the US average is 4.3%.