In Maryland, the share of small businesses offering health insurance has plummeted from 49.0% in 2009 to just 35.7% in 2023, marking one of the nation’s steepest declines. A new analysis from Take Command reveals that skyrocketing premiums, which have risen 182% since 2000, are pricing small firms out of providing coverage, pushing many to adopt alternative solutions like Health Reimbursement Arrangements (HRAs).
The drop in Maryland translates to 8,635 fewer small businesses offering health insurance and 7,440 fewer employees at firms with coverage over the 14-year period. This 13.3-percentage-point decline ranks Maryland 15th among states for the largest reduction in small business health coverage. The average annual single-coverage premium in Maryland reached $6,604 in 2023, straining small firms with limited resources, according to Take Command’s full report.
Nationally, only 30.1% of small businesses with fewer than 50 employees offered health insurance in 2023, down from 47% in 2000, as premiums soared from $2,827 to $7,974—2.4 times the rate of inflation. Maryland’s challenges mirror this trend, with the state’s small business employees at firms offering coverage falling from 66.7% in 2009 to 56.7% in 2023. The Great Recession of 2008–2009 accelerated the decline, as Maryland firms, like others nationwide, cut benefits to weather financial strain, dropping from 43.2% in 2008 to 41.0% in 2009.
The Affordable Care Act (ACA), implemented in 2010, reshaped Maryland’s insurance landscape. While the ACA’s individual marketplaces expanded access to coverage, its exemption of small businesses from the employer mandate led some Maryland firms to discontinue group plans, as employees could seek subsidized insurance through Maryland Health Connection, the state’s ACA exchange. This shift contributed to a national decline, with small business coverage falling to 29.4% by 2015.
Maryland’s small businesses across industries have felt the impact. Nationally, wholesale trade saw the steepest decline (-17.6 points), followed by mining and manufacturing (-13.3 points) and professional services (-13.2 points). In Maryland, similar trends likely affect these sectors, though specific state-level industry data is less detailed. The smaller impact on employee access—down 10.0 points in Maryland—suggests that larger small firms, closer to the 50-employee threshold, are more likely to maintain coverage.
To cope, Maryland small businesses are increasingly adopting HRAs, such as Qualified Small Employer HRAs (QSEHRAs) and Individual Coverage HRAs (ICHRAs). These allow employers to reimburse employees tax-free for premiums or medical expenses up to a set limit. Nationally, HRA adoption has nearly tripled since 2020, with over 80% of employers using them to offer benefits for the first time, helping attract talent cost-effectively, as noted by the HRA Council.
Compared to other states, Maryland’s 35.7% coverage rate is above the national average but lags behind leaders like Hawaii, where 71.8% of small businesses offer coverage due to a 1974 state mandate. Northeastern states, including Connecticut (-24.6 points) and New Jersey (-22.7 points), saw larger drops, driven by high costs and robust individual markets. Southeastern and Mountain West states, like Wyoming (18.3%) and Alaska (13.6%), have the lowest rates.
The findings, based on the Medical Expenditure Panel Survey from the Agency for Healthcare Research and Quality, highlight the need for solutions to support Maryland’s small businesses. As premiums continue to climb, HRAs offer flexibility, but the decline in traditional coverage underscores broader challenges for the state’s small firms and their workers.