Read more about SBAM’s policy positions on Health Care.
Article courtesy of MIRS for SBAM’s Lansing Watchdog newsletter
Small businesses across Michigan are increasingly turning to risk pools to manage rising health insurance costs, but not every company is seeing the same benefits, experts say.
While such shared insurance programs can provide financial relief and stability, the experience of each business varies, highlighting both the promise and the challenges of the risk pool approach, said Eric Hannah, a risk advisor at Brown and Brown Risk Strategies in East Lansing.
Risk pools are where thousands of small businesses are grouped for insurance purposes.
Hannah said 2026 has been the toughest year in the medical insurance market in the past decade for employers “to deliver high-value benefits to their teams.”
The traditional insurance market is on an unsustainable path, leading to a rise in advanced or alternately financed medical plans, Hannah said.
Small business owners have long struggled to offer health insurance because their costs are often higher and less stable than for large companies, according to the National Institute for Health Care Management Foundation in Washington.
Small businesses have less power to negotiate better prices and face higher administrative costs, the foundation said.
“The Small Business Association of Michigan wants to change the law to allow for risk pools to be built for combined industries,” said its CEO Brian Calley.
Currently, the law restricts risk pools to businesses within the same industry. That means retailers can partner only with other retailers and restaurants can only join with other restaurants, preventing businesses from different industries from pooling together, Calley said.
That means small businesses would essentially be self-insured together. They would pay premiums into a common fund, and that fund would pay for the health care claims by the employees, according to the association.
When a company asks for a quote, the insurance carrier gives rates based on the plan, the people in it and where they live, according to the American Academy of Actuaries.
Each employee may have a different rate depending on age, gender, zip code and the plan they choose. A pool sets rates in a predictable way, with increases based on the overall costs of all the businesses in it, said Hannah.
Premiums for small businesses have gone up about 12% to 18% since 2022, depending on the insurer and plan, he said.
He also said the downsides include employers being unable to customize their plans. If a company’s employees use less health care than others in the pool, that company is helping cover the costs for businesses whose employees use more.
There are several other types of risk pools, like union plans, association health plans and self-funded or level-funded plans.
Even in these setups, employers usually pass some of the financial risk to an insurance or reinsurance company, said Hannah.
Employers are moving toward smaller groups where they have more control over costs through transparency and customization, he said. Many are also teaming up with similar businesses to manage health care expenses the same way they manage other parts of their operations.
Calley said small employers would benefit from plan design options, wellness programs and being able to negotiate reimbursement rates. Those are things that big employers can do, he said.
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