Saving Health Insurance for Small Businesses

Action needed to make New Jersey Small Group Market affordable.

By Linda Schwimmer, JD On Dec 31, 2020

In New Jersey, small businesses with fewer than 50 employees are not required to provide health insurance. However, many know the value of offering this benefit to attract employees and keep them and their families healthy. 

At the same time, the New Jersey Small Group Market is in serious danger. The market has experienced steep declines in enrollment; from about one million people covered at its peak in 2005 to about 300,112 people at the end of Q2 2020. Experts predict the COVID-19 pandemic will drive even more people out of this market, exacerbating an already dire situation. 

While steps have been taken to improve affordability for the individual marketplace, small employers struggle to provide affordable quality coverage. As more individuals leave this market due to a lack of employer offerings or cost concerns, the risk pool will continue to shrink, in turn, increasing cost and creating a dangerous downward spiral. 

State leaders – both in the Murphy administration and Legislature – are deeply concerned and have looked to the New Jersey Health Care Quality Institute for actionable steps to ensure that small businesses can maintain quality healthcare coverage for employees and their families. To address this need, the Quality Institute created a comprehensive package of nine recommendations. These include providing a state-based tax credit to small employers that provide quality health insurance, and removing restrictions on various benefit designs. 

Short-term efforts must be taken to both stabilize the small group market and limit the negative impacts that declining enrollment has on employers and consumers. But long-term solutions, aimed at overall affordability and transparency, also must be actively explored. 

This issue does not only affect employers and employees of small business – but the state overall. According to New Jersey’s Office of Small Business Advocacy, the state ranks 11th in the nation for the number of small businesses and enterprises, making them an essential component of the state’s economy. Without necessary reforms, small businesses will face additional fiscal pressures in providing healthcare coverage, a burden that many could not tolerate even before COVID-19 impacted their organizations. 

About the Author 

Linda Schwimmer is president and CEO of the New Jersey Health Care Quality Institute. 

Addendum: The New Jersey Business & Industry Association has also been advocating for high-quality, cost-effective healthcare for small employers, according to Chrissy Buteas, chief government affairs officer, NJBIA. While enrollment in the small group market was declining, premiums were increasing for those remaining in the market. It is expected that COVID-19-related layoffs and small business shutdowns may cause a further decrease in small group enrollment. This will further shrink the risk pool. The result is that prices will continue to increase, making it even harder for small businesses to provide benefits through the small employer market. 

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