Since Massachusetts enacted health care reform in 2006, followed by the national Affordable Care Act in 2010, access to insurance has become nearly universal. But where people get their coverage has changed, and fewer people are covered by small employers. The trend reflects a growing concern about the competitiveness of the businesses that are the economic backbone of the state — one that also threatens to increase the cost to taxpayers.

According to the state Department of Insurance, the number of people covered by small group insurance plans in Massachusetts (covering two to 50 employees) fell from more than 800,000 in 2006 to 517,000 in 2014, the year The Affordable Care Act was fully implemented, up to 335,000 in 2022. In 2021 alone, according to the Center for Health Information and Analysis, the number of people insured in the small group market fell 4.3 percent, compared to 1 .3 percent decrease in the number of people with employer-sponsored insurance overall.

The reason, employers say, is that costs continue to rise and the plans small businesses can offer are worse than those offered by larger employers. According to CHIA, in 2021, 72 percent of people covered by small business plans had deductibles above $1,400 for individuals, compared to 43 percent of all Massachusetts residents with commercial insurance. Plans offered by small businesses have slightly lower premiums on average, but those plans also cover a smaller percentage of medical costs, and employees must pay a higher percentage of their premiums, especially for family plans, according to CHIA. And premiums are rising fast — the average small group plan is raising premiums by 5.3 percent annually from 2019 to 2021, compared with 3.2 percent for large businesses.

Mark Cohen, co-owner of Wilmington recycling company OPRSystems, which has 18 employees, said he offers a plan with no deductible and one with a deductible each year, with the company paying 56 percent of the premiums. This year, the total cost of the health plan without the deductible is $40,000.

“The cost of health insurance has exploded,” Cohen said. “It’s another reason younger families can’t afford to live in Massachusetts.”

There are several reasons why small businesses find it difficult to secure affordable health insurance. In 2006, Massachusetts consolidated its individual and small business markets. It was a policy decision designed to make coverage more affordable for individuals, and it worked: Small businesses now subsidize individual coverage. An advisory board formed in 2020 to look at the unified marketplace estimated in a January 2022 report that unbundling the marketplaces would reduce premiums for small businesses by 2 to 4 percent.

To help small businesses with this merger, Massachusetts introduced “rating factors,” requiring insurers to set rates for businesses by taking into account factors such as industry and group size. So an accounting firm with a wellness plan that joins a group purchasing cooperative would have lower rates per person than a 10-person commercial fishing business, based on the estimated health risks of the group being insured. But the Affordable Care Act established more limited scoring factors that phased out small business benefits.

Under state law, insurance products are designed differently depending on the size of the company. Larger companies’ prices are based on the health care costs of their employees, so implementing wellness programs or incentivizing lower-cost care lowers premiums. For smaller companies, rates are set based on the demographics and costs of everyone in the combined market, and they can’t negotiate prices.

Many large companies self-insure under arrangements regulated by federal law. These companies can ignore state coverage mandates, such as required coverage for autism treatment or hearing aids for children, which saves money.

John Hurst, president of the Massachusetts Retailers Association, worries about a “total collapse” in small business insurance coverage. “We need to understand what’s going on and find solutions for small businesses to keep them competitive,” Hurst said.

The lack of good, affordable health insurance options puts small businesses at a disadvantage compared to their competitors, both larger and out-of-state companies. There are other implications for public policy. Employers with fewer than 50 workers are not required to offer health insurance, so some may simply opt out.

If insurance is not available or is expensive, more employees will switch from employer-based to government health insurance, increasing the cost to taxpayers. That trend is likely to increase if lawmakers launch a proposed pilot program allowing anyone earning up to 500 percent of the federal poverty level ($150,000 for a family of four) to receive state-subsidized care through the Health Connector.

Businesses are concerned that if younger employees—those most likely to qualify for and be interested in Health Connector’s less expensive limited-network plans—leave, business-sponsored plans will stick with older workers, which further increases costs.

There is also a growing movement for small businesses to join professional employment organisations, allowing small companies to join a self-insured pool. This means fewer companies are required to comply with government mandates.

“The concern here is the spiral of death,” said Josh Archambault, senior fellow for health policy at the Pioneer Institute, who sits on the merged market’s advisory board. “Everyone who can leave is leaving, and the only people left are the sickest for small employers.”

There is no magic bullet. Then-governor Charlie Baker proposed making it easier for small businesses to form cooperatives where insurance premiums would be based on their claims experience. The Massachusetts Retail Merchants Association is backing a bill that would give small businesses discounts based on some of the state’s previous rating factors. The Single Market Advisory Council report raised a number of policy options without endorsing them. One is to create a government reinsurance program that pays out when costs from the single market exceed a certain amount. Another would be to abolish the single market and separate individuals from small businesses.

Insurance products with limited networks or price-shopping incentives could reduce costs, but employees tend to dislike limited networks and price-shopping is difficult without more transparency. If insurers provide smaller companies with more information about what drives their health care costs, it can help companies find solutions to reduce costs.

Underlying these concerns is the need to reduce healthcare costs, which would benefit all segments of the market.

David Auerbach, senior director of research at the Massachusetts Health Policy Commission, called the lack of small business coverage a “canary in a coal mine indicator of a problem” that health care is too expensive. “It’s getting worse and worse,” he said.

Editorials represent the views of the Boston Globe Editorial Board. Follow us on Twitter at @GlobeOpinion.

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