Paper Trails

Why is my business’ health insurance plan so expensive?

Are you grappling with the rising costs of your small business health insurance plan? If so, you’re not alone. Studies have shown that costs for workplace small business health insurance plans are expected to be more than 6% higher in 2024 over 2023.  Many small business owners and HR professionals are in this boat, feeling the pressure of rising premiums and wondering how to manage them.

In this article, we’ll dive into the reasons behind these surging costs for small business health insurance plans in Maine.  We will also touch on some viable options for your small businesses. At Paper Trails, we’re committed to exploring these complexities and supporting you through education and insights. We understand the challenges you face, and we’re here to help you navigate the difficulties of health insurance premiums.

Why is my small business health insurance plan so expensive?

In Maine, there have been many changes in regards to health insurance.  Collectively, these changes all have added to the increasing premiums that small business owners have noticed.  Let’s explore some of these factors.

Increasing medical costs

When we talk about the costs of small business health insurance plans going up, it’s not just the premiums that are getting pricier. A lot of this comes down to how much healthcare itself costs.  One of the major parts of this are prescription drugs. Some medications cost a lot to make and get to the market. This means that when insurance companies cover these drugs, they have to spend more money, which can lead to higher premiums for small businesses like yours.

Then there are the fees for medical procedures and staying in the hospital. Medical technology is always getting better, which is great because it helps us live healthier lives. But, these advancements can be expensive. Insurance companies have to cover these higher costs too, and that can mean higher premiums for your business.  It’s a bit like a cycle – as healthcare gets more advanced and expensive, insurance companies have to charge more to keep up. This is a big reason why health insurance can be so costly for small businesses.

Legislative and regulatory changes

Like other legislation changes in Maine, there have been some recent shifts in healthcare laws and insurance regulations that are key factors affecting premiums.

First off, the Maine Guarantee Access Reinsurance Association (MGARA) has adjusted its reinsurance parameters for 2024. Previously, carriers were reimbursed 100% for claims between $90k and $275k. Now, they’ll only get back 75% for claims between $135k and $275k and will have to cover all claims over $275k themselves. This significant change means insurance carriers are facing higher costs, which are then passed on to small businesses in the form of rate increases—accounting for about one-third of the rate hike for 2024.

In addition to reinsurance changes, several Maine state mandates have been introduced. These include:

  • Prosthetic Devices for Minors: A mandate now requires coverage for a recreational prosthetic device for enrollees under 18, in addition to a medically necessary one.
  • Fertility Care Access: Coverage must now include fertility diagnostic care, fertility treatment, and certain fertility preservation services.
  • Dental Care for Cancer Survivors: Medically necessary dental procedures must be covered for enrollees diagnosed with cancer.
  • Donor Breast Milk Coverage: Insurance plans must cover donor breast milk for infants meeting specific criteria.
  • Abortion and Breast Examination Coverage: New laws prohibit cost-sharing for abortion services and certain breast examinations in non-HSA plans.
  • Prior Authorization for Rehab Services: The first 12 visits of rehabilitative or habilitative services, such as physical therapy, now require no prior authorization.

Each of these mandates aims to improve access and outcomes for specific health services, but they also contribute to increases in costs for small businesses. Specifically, these mandates are expected to account for a +2.5% rate increase for medical renewals in 2024.

Administrative costs

There are a number of things that go on behind the scenes of your health insurance plan that add to rising costs. It’s not just about the healthcare services; there’s a whole operation working in the background to keep things running smoothly.  From customer service to handling claims and making sure the plan follows all the rules, your health insurance plan needs to worry about these things as well.

These tasks are important because they help everything go smoothly when you or an employee needs care. But they also need people, technology, and time to manage, which costs money. This is a big reason why health insurance isn’t cheap. It’s not just paying for doctor visits or medications; it’s also paying for the system that manages those benefits. While necessary, these administrative tasks add additional costs to providing health insurance for your business.

Small business health insurance plan options

There are many options for insurance plans that small business owners can consider.  We suggest consulting with a professional before making a decision on which is best for your business.  A few of these options are:

Health Reimbursement Arrangements (HRAs)

Health Reimbursement Arrangements, or HRAs, are like a personalized bank for your employees, but it’s the business that puts money in. With an HRA, your small business sets aside a certain amount of money each month that employees can use for qualified medical expenses, including premiums for their health insurance. This method is flexible because you can decide how much money to contribute, and it’s cost-effective since you’re only paying for the expenses incurred, rather than a flat premium for everyone.

HRAs are particularly appealing for small businesses because they offer a way to provide health benefits without the high costs and complexities of traditional health insurance plans. Employees get the freedom to choose their health plans that suit their needs, which can lead to higher satisfaction and retention. Plus, HRAs can have tax advantages for both the employer and the employees, making them a financially smart choice. For small businesses looking to attract and retain talent by offering health benefits, HRAs provide a customizable and budget-friendly solution.

Joining a Professional Employer Organization (PEO)

Partnering with a Professional Employer Organization, or PEO, can be a game-changer for small businesses struggling with the high costs of health insurance. PEOs allow multiple small businesses to pool together, giving them access to the types of health insurance plans usually reserved for larger corporations. This can lead to lower premiums and better benefits because you’re essentially buying in bulk.

A PEO does more than just provide health insurance; it can also take over many of the administrative burdens associated with HR tasks, payroll, and compliance. This can free up your time to focus more on growing your business. For small businesses, joining a PEO can be a strategic move to not only get more affordable health insurance but also to streamline operations. It’s a comprehensive solution that offers both financial and operational benefits.

Exploring the Small Business Health Options Program (SHOP)

The Small Business Health Options Program, or SHOP, is a marketplace created specifically for small business owners. It’s part of the Affordable Care Act and is designed to help businesses with 1 to 50 employees offer health and dental insurance to their workers. SHOP gives small businesses the ability to compare a variety of plans from different insurers to find one that fits their budget and meets their employees’ needs.

One of the key advantages of SHOP is that it offers flexibility in terms of how much of the premium cost the employer wants to cover. Plus, businesses that use SHOP and cover at least 50% of their employees’ premium costs may qualify for the Small Business Health Care Tax Credit, which can significantly lower the cost of providing health insurance. For small businesses looking to provide health benefits to their employees for the first time or seeking more affordable options, SHOP is a valuable resource to explore.


Understanding why your small business health insurance plan is expensive is the first step in finding a solution that works for you and your employees. While the landscape of health insurance can be complex, there are a variety of options available to help manage costs without sacrificing quality coverage.

At Paper Trails, our mission is to support small business owners and HR professionals by providing the information and resources you need to make informed decisions about your health insurance plans. If you are ready to explore new strategies for your small business health insurance, contact our team here for help finding the right solution for your business.