House Bill 156 and Senate Bill 218 were introduced as a well-intended effort to give small businesses more affordable health insurance options.
Unfortunately, as we detailed, evidence shows the consequence of the proposals are higher premiums for small businesses on a whole.
These bills would make it possible for businesses with five or more employees to have self-funded insurance plans. Currently you must have a minimum of 12 employees.
Having a self-funded insurance plan simply means a business pays their own medical expenses. They differ from “fully insured” businesses that pay premiums to an insurer to cover medical expenses.
Due to how insurance markets work, simply lowering the employee threshold has proven to be a costly solution.
In Georgia, where the threshold was lowered, premiums increased by 81 percent over six years for small businesses who chose not to self-fund. That amounts to more than $4,500 per person per year.
In Kentucky, premiums increased by 67 percent, or more than $3,500 per person per year.
In Virginia, premiums increased by 37 percent, or nearly $2,000 per person per year.
Here in North Carolina, premiums for businesses on the fully insured marketplace are increasing by as much as 19 percent in 2025 due, in part, to businesses moving off the marketplace for “alternative coverage” options such as those created by the legislature reducing small group size from 25 to 12 in 2024.
The problem these bills seek to address is real: health insurance is too expensive for small businesses. But the solution it proposes is the wrong one.
Thankfully, legislative leaders at the North Carolina General Assembly have passed a law set to go into effect this year that will help the very same businesses as those addressed in House Bill 156 and Senate Bill 218.
At the end of 2024, the General Assembly created a pathway where small businesses with two or more employees can come together under an umbrella organization like the North Carolina Chamber to purchase health insurance as a one large business.
By coming together and functioning as a large business, these small businesses can spread medical cost around to a larger base of individuals.
This will lower their premiums because as more people pay in to the insurance pool, everyone can pay less to cover the cost of care for the group.
Large businesses also have greater negotiating power with insurers. They bring more customers to the table so they can demand better deals.
With this path already existing for small employers, there is no need to lower group size and cause price increases on the fully insured marketplace.
The legislature has already created a better solution.
It is the one we should stick with.
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