Washington’s Small Businesses are About to Pay More for Health Insurance and it’s the Government’s Fault
If you run a small business in Washington, your health insurance costs are about to increase. In 2025, premiums are expected to jump by nearly 12%, making it the largest increase we’ve seen in more than a decade.
According to a recent report from the Washington State Standard, this rate hike will impact nearly 220,000 people, including employees and their families, who rely on employer-provided insurance, as if things weren’t already hard enough for small business owners.
The hardest hit will be those insured by Regence BlueCross BlueShield of Oregon, which is slapping a massive 21.9% increase on small businesses—affecting around 6,000 people. To put it bluntly, small businesses already struggling to keep their doors open are about to get squeezed even tighter because Washington’s government thinks it is a good idea to meddle in the state’s healthcare industry.
“Health insurance costs have been the number one problem for small businesses for 38 years running, and these increases will only make it worse,” Patrick Connor, Washington state director for the National Federation of Independent Business, told the Washington State Standard.
This isn’t just a Washington problem, either. Nationwide, small businesses are facing mounting pressure when it comes to health coverage. According to KFF (Kaiser Family Foundation), the average annual premium for an individual employee has jumped to $1,368, a six percent increase from 2023. For family coverage, the cost is a staggering $6,296—up 24% over the past five years. Employers are now footing an average of $7,584 per individual employee just to offer health insurance.
If this trend continues, many small businesses will have to decide whether to pass these ballooning costs onto their employees or cut back on benefits altogether. But what’s causing these relentless price hikes, and more importantly, is there anything that can be done to stop them?
While rising healthcare costs play a role, Washington’s small businesses aren’t just victims of market forces. They’re being squeezed by state-level regulations and a lack of competition in the health insurance marketplace, which always makes it harder for smaller companies to compete.
Washington’s insurance market is loaded with state-level mandates that drive up the cost of health insurance. These regulations require insurers to cover a wide range of services, many of which small businesses may not want or need for their employees. The problem is that everyone is forced to pay for this added coverage, whether they use it or not. To put it simply, insurance companies are not allowed to offer a wide variety of options to their customers.
For instance, Washington mandates that health plans cover everything from autism therapies to chemical dependency treatments and reproductive health services. While these services are important for some, they come at a cost—and that cost is passed directly onto small businesses in the form of higher premiums. Moreover, not everyone needs these particular services.
Furthermore, Washington’s guaranteed issue laws require insurers to offer coverage to all applicants, regardless of their health status. This might sound like a win for fairness, but it forces insurers to spread the risk across all policyholders, driving up premiums for everyone. Washington’s community rating system adds another layer of cost, as it restricts insurers from adjusting premiums based on individual risk factors like age or health history.
As Washington Insurance Commissioner Mike Kreidler stated, “We’re hopeful we can improve the underlying factors that have pushed costs up,” but the reality is that these very policies are contributing to the problem. Businesses are left with fewer choices, higher costs, and less flexibility to choose what’s best for them and their employees.
Here’s another harsh truth: Washington’s health insurance market suffers from a severe lack of competition. Currently, only ten insurers offer plans to small employers, which is simply not enough to drive innovation or keep prices in check. In a competitive market, insurers would be forced to lower premiums and provide better services to attract customers. But in Washington, insurers can jack up prices with little fear of losing business because employers don’t have many alternatives.
One of the reasons for this lack of competition is that Washington, like many states, makes it difficult for out-of-state insurers to offer plans. Strict and unnecessary licensing and regulatory requirements keep many potential competitors out of the market, meaning small businesses are left with fewer options and higher prices.
So what can we do? The answer is simple: let the free market do its job. Government regulations are stifling competition and inflating costs, and it’s time to cut the red tape.
First, Washington must repeal many of its state-level insurance mandates. Instead of mandating that every plan to cover the same set of services, businesses should be allowed to pick and choose the coverage that makes the most sense for them.
Why should a 30-year-old employee without children pay for maternity care? Why should a small business with a young, healthy workforce be forced to include high-cost treatments that none of their employees will ever need? What’s the point of compelling health insurance to include treatment for autism for everyone when only a few deal with the condition?
By giving businesses the freedom to select more basic or catastrophic coverage plans, we could significantly lower premiums and offer more choice to employers and employees alike. It’s a simple fix: less government interference means more affordable options.
Next, Washington should open the market to out-of-state insurers. Currently, small businesses are limited to the few insurers that have jumped through the state’s regulatory hoops. But what if businesses could buy insurance from any company in the country? Allowing interstate competition would introduce more players into the market, driving down prices and promoting innovation.
Competition works. Government meddling doesn’t. When insurers have to fight for your business, they’re forced to offer better prices and better products.
As health insurance costs continue to rise, small businesses in Washington are stuck in a trap created by government overreach. But it doesn’t have to be this way. By deregulating the market and encouraging competition, Washington could offer businesses the affordable, flexible insurance options they desperately need.
The bottom line is that getting the government out of the healthcare industry will empower the people to make their own decisions about health insurance and medical care. Washington’s predicament shows that allowing the state and its corporate allies to control the market has not produced positive results. It’s about time that these obstacles are removed.