How Will COVID Impact Small Business Health Insurance in 2022?

Posted By: Team Moody,

It’s undeniable how the COVID-19 pandemic has dealt businesses negatively in ways more than one. Health insurance is one of the affected areas since contracting COVID is costly and affects their ability to work.

Even with employee benefits, getting infected with COVID costs high and is expected to rise as the pandemic progresses continually.

Here we discuss its impact on health insurance issued to employees of small businesses as 2022 approaches and how to counteract these impacts and stay afloat.

Health insurance is a primary factor in attracting and keeping employees.

Although small businesses suffer relatively more due to the pandemic, it’s not like they can reduce losses by cutting health insurance benefits. Health insurance remains the primary benefit most potential employees look for in a company during the pandemic.

This scenario may initially look good, but several small businesses struggle to provide healthcare insurance benefits to match the expenses incurred during the pandemic.

Higher contribution rates

A costly disease like COVID requires high contribution rates to pay additional expenses like hospital equipment and medicine. For example, tocilizumab, a drug used for hospitalized patients, can cost up to around $4000 in the US and other medication, hence the rise in treatment costs.

The rate increase requests are mainly due to these changes and are higher than last year. These requests are likely due to the more costly upkeep required for patients, especially the Delta variant.

However, this solution is not a permanent one. Employees will eventually struggle to make ends meet with more significant contributions taken away from their paycheck.

Making the switch to cheaper plans

Healthcare plans before COVID-19 are unlikely to cover medical bills due to hospitalization and medication. Still, many small businesses cannot afford to set up a policy that comprehensively covers COVID.

A lot of small businesses are considering switching to cheaper plans with fewer benefits. This step should increase take-home pay for employees and lower contributions for employers. In theory, this helps businesses and their employees survive until they get sick of COVID and incur additional expenses outside the insurance policy.

Some employers are also considering the switch to plants exempt from ACA requirements as a more viable option. Although this helps small businesses survive the pandemic, it is merely a band-aid solution, not a permanent approach, just like higher insurance rates.

Completely absorbing cost increases

As a result of COVID-19’s impact, businesses have the option of completely absorbing healthcare insurance increases. While benefiting employee health, this may be harmful to the company, especially when many employees are sick with severe COVID-19.

Like the other impact stated above, making this move doesn’t solve the increased hospitalization and medication costs due to COVID-related illnesses. It is rather just a matter of shifting insurance costs between employers and employees.

Reducing the cost of employee health plans

Several options may help in reducing the cost of employee health plans without sacrificing employee benefits. Dealing with claims expenses directly results in reduced employee health plan costs by negotiating on prices and providing appropriate levels of benefits.

However, small business owners can avoid many other costs by paying less for better health insurance plans and eliminating unnecessary expenses. Small businesses can also try to risk pooling their employee health plan.

Risk pooling offsets the higher costs associated with less healthy individuals by lowering costs related to healthier people, either throughout the entire plan or within each premium rating category. An example of a two-tiered health plan would be that members pay the same premium for lower-quality benefits in silver. In contrast, their premiums would be higher for higher-quality benefits.

This type of risk pooling is advantageous to healthy people because they will not have to worry about paying higher premiums than those who are less healthy. It also helps reduce costs for companies that offer these plans.


The end of COVID is nowhere to be seen, but it does not mean the fate of health insurance for small businesses needs to be bleak.

Policymakers are finding ways to make the small business health insurance market more stable despite its challenges. More small businesses are considering switching from the ACA-compliant market to more affordable, ACA-exempt health insurance plans in 2022. Policymakers must study an alternative to stabilize price-sensitive insurance offerings further.

About Moody Insurance Worldwide

Moody Insurance Worldwide, a division of Moody & Associates that was founded in 1914, is a leading provider of risk management programs and insurance coverage to individuals and businesses across the East Coast. We write all sizes of businesses, with technical expertise in many key industry areas, and provide personal insurance programs for estates and high net worth individuals. Our licensed, experienced commercial account managers can work with you to determine the coverage that you need at a competitive rate. Contact us today at (855) 868-0170 to learn more about what we can do for you.