Why Health Care

One of the primary reasons health coverage is becoming more expensive is the consolidation within the healthcare system, particularly among hospital systems and insurance companies.

When hospitals merge into larger systems or acquire physician practices and specialist groups, they gain more control over local markets. That trend has accelerated dramatically. By 2010, 80 percent of hospital metro areas were already highly concentrated, and today 97 percent of inpatient hospital markets are highly uncompetitive. Between 2013 and 2021, the share of physician practices owned by hospitals rose from 15 percent to 53 percent, while the share of physicians employed by hospitals rose from 27 percent to 52 percent.

When competition disappears, dominant health systems gain enormous leverage in negotiations with insurers. Insurers often cannot leave those systems out of their networks without making coverage less marketable to employers and workers. That gives large hospital systems more power to demand higher reimbursement rates, and those higher costs are ultimately passed on to the small businesses buying coverage. Hospital and insurer consolidation is consistently associated with higher prices, while improvements in quality and outcomes are generally limited or marginal.

Bigger Systems, Bigger Bills

The cost impact is not theoretical. Hospital mergers increase commercial prices by 5 to 20 percent on average, and in some cases by more than 30 percent, without significant improvements in mortality, patient experience, or readmission rates.

Consolidation also raises prices in less visible ways. When hospitals acquire independent physician practices, routine services can be reclassified and billed as hospital-based care. That can add $75 to $100 to an outpatient visit, even when the patient receives the same care from the same doctor in the same office. These added facility fees may seem small in isolation, but over time they increase premiums, deductibles, and out-of-pocket costs for workers and employers alike.

Insurance Consolidation Adds Another Layer of Pressure

Hospital consolidation is only half the story. Insurance markets have also become more concentrated. Large insurers have expanded through vertical integration, owning pharmacy benefit managers, pharmacies, clinics, and physician groups. Commercial, ACA, and Medicare plan markets are described in the testimony as highly concentrated and uncompetitive. In many county-level markets, two insurers control more than 70 percent of enrollment. In Medicare Advantage, 97 percent of counties were highly or very highly concentrated in 2024, and about 93 percent of beneficiaries were enrolled in those markets.

For small businesses, this creates a squeeze from both sides. Large hospital systems can demand higher prices from insurers. Large insurers, facing limited competition themselves, have less incentive to cut administrative costs, expand options, or compete aggressively for small-employer business. When big systems and big insurers negotiate, Main Street employers and their employees are the ones left paying more through higher premiums, narrower networks, larger deductibles, and more cost-sharing.

Why Small Businesses are Hit the Hardest

Small firms do not have the same cushion as large corporations. They cannot easily absorb another year of premium spikes. They cannot spread risk over tens of thousands of workers. A large, self-insured employer may have leverage and flexibility, but a local manufacturer, restaurant, contractor, or retailer usually does not. One high-cost medical case can seriously damage a small firm’s finances.

That pressure shows up across the business. Employers may delay hiring, hold down wages, cut hours, or reduce other investments just to keep health coverage in place. Workers may still have insurance, but pay more for it through premium contributions, deductibles, and out-of-pocket costs. Others lose coverage entirely when a small business can no longer afford to offer a plan. This is not just a health care problem. It is a small business problem, a workforce problem, and an economic growth problem.

Real Competition Matters

If policymakers want to make health coverage more affordable for small businesses, they need to confront consolidation head-on. That means stronger scrutiny of hospital mergers, closer oversight of insurer market power, and reforms that stop rewarding size and market dominance over value and competition.

For Main Street employers, the status quo is not sustainable. Every effort to rein in consolidation is a step toward lower costs, more choice, and a health care system that works better for the small businesses and workers who keep our economy running.

Health insurance costs have risen so sharply that many small employers are being pushed to the breaking point. Year after year, rising premiums force business owners to make impossible choices: absorb higher costs, shift more of the burden onto workers, reduce hiring, hold down wages, cut hours, or stop offering coverage altogether. For small firms operating on thin margins, even one more premium increase can be the tipping point.

One of the biggest reasons coverage has become so expensive is consolidation across the health care system, especially among hospital systems and insurance companies.

Consolidation is Raising Health Costs for Main Street

Consolidation may sound like an abstract policy issue, but for small businesses it has direct, real-world consequences.

When hospitals merge into larger systems or buy physician practices and specialist groups, they gain more control over local health care markets. When insurance companies grow larger and more concentrated, they also gain more control over the market. The result is less competition and more pricing power concentrated in the hands of a few large players.

That matters because when competition disappears, prices rise.

Dominant hospital systems can demand higher reimbursement rates from insurers because insurers often cannot exclude those hospitals and doctors from their networks without making their plans less attractive. At the same time, highly concentrated insurance markets give small employers fewer affordable choices and less leverage. Instead of a functioning market that rewards value and competition, small businesses are stuck paying whatever the largest systems and insurers can command.

Those higher costs are reflected in the premiums, deductibles, and out-of-pocket costs paid by small businesses and their employees.

Small Businesses Feel the Squeeze First

Large corporations often have more flexibility to manage rising health costs. They may self-insure, spread risk across a large workforce, or absorb short-term increases more easily.

Small businesses usually do not have those options.

A local restaurant, retailer, contractor, manufacturer, or family-owned business does not have endless room in its budget. When health coverage gets more expensive, small employers have fewer ways to respond. They have to make hard decisions in real time.

For some, that means paying more each year to maintain the same level of coverage. For others, it means offering plans with higher deductibles or asking employees to pay more each month. And for too many, it means dropping coverage entirely because the numbers no longer work.

That is why consolidation is such a serious threat to small business health coverage. It is not just raising costs. It is making it harder, and in some cases impossible, for small employers to continue offering benefits at all. Employees are then forced to enroll in government-run health coverage.

Workers at Small Businesses Pay the Price, Too

Employees feel these pressures just as much as employers do.

When the cost of coverage rises, workers are often asked to shoulder a greater share through higher premium contributions, larger deductibles, and higher out-of-pocket expenses. Even if an employee technically still has insurance, that coverage can become harder to use and harder to afford.

A worker may delay seeing a doctor because of cost. A parent may put off follow-up care for a child. A family may skip treatment, prescriptions, or routine care because the deductible is too high. In those cases, coverage exists on paper, but affordability is slipping away in practice.

That is especially damaging for workers at small businesses, who often have fewer plan choices and less negotiating power than employees at large companies. When consolidation drives up costs, these families are left exposed. They pay more each month, more when they seek care, and more when they need ongoing treatment.

Hospital Consolidation Adds Hidden Costs

Hospital consolidation also creates hidden price increases that many small businesses and workers never see coming.

When hospitals acquire independent physician practices, services that were once billed as routine office visits can be reclassified as hospital-based care. That means patients can be charged significantly more for the same appointment, in the same office, with the same provider.

Those added charges may look small at first, but over time, they add up. They increase the total cost of care, which then feeds into higher insurance premiums and greater cost-sharing. Small businesses end up paying more to provide coverage, and employees end up paying more to use it.

Insurance Consolidation Makes a Bad Situation Worse

Insurance consolidation adds another layer of pressure.

When insurance markets are dominated by a small number of carriers, small businesses have fewer meaningful options. Less competition can mean fewer affordable plans, less innovation, narrower networks, and less pressure to control costs. That leaves small employers trapped between rising hospital prices on one side and limited insurer competition on the other.

Main Street gets squeezed from both ends.

Big hospital systems push prices up. Big insurers have little incentive to bring them down. Small businesses and their employees are left to absorb the fallout.

Why This Matters

This is not only a health care issue. It is a small business issue, a workforce issue, and an economic issue.

When small employers cannot afford to offer health coverage, they struggle to compete for workers. When employees cannot afford the coverage they have, financial stress rises, and access to care suffers. When both happen at once, the result is a weaker small business sector and a less secure workforce.

Main Street businesses want to do right by their employees. They want to offer coverage that protects workers and their families. But consolidation is making that goal harder to reach every year.

A More Competitive System Would Help Small Businesses

If policymakers want to make health coverage more affordable, they need to address the growing concentration of power in the health care market. That means stronger scrutiny of hospital mergers, closer oversight of insurer market power, and reforms that restore real competition.

Small businesses need a health care market where prices are disciplined by competition, not driven by consolidation.

For Main Street, the status quo is not sustainable. Reining in consolidation would help lower costs, expand options, and make it more realistic for small businesses to keep offering health coverage that their employees can actually afford.