Health care costs are posing significant challenges for small businesses in Michigan, according to a recent survey by the Small Business Association of Michigan (SBAM). The survey, conducted in May 2025, revealed that 76% of SBAM members find health care costs are hindering their ability to hire new employees. Additionally, 51% have had to reduce or eliminate benefits due to these expenses.
Brian Calley, President and CEO of SBAM, highlighted the impact during an appearance on A Healthier Michigan podcast. “Those were shockingly high numbers,” Calley said. He attributed the cost increases primarily to rising medical costs at hospitals and escalating drug prices. “It’s not the insurers; Blue Cross Blue Shield of Michigan experienced a net underwriting loss of $1.7 billion last year,” he added.
Calley emphasized that both hospital expenses and prescription drug prices are increasing faster than the current U.S. inflation rate of about 2.3%. USAFacts reports that drug prices have risen three times as fast as overall inflation since 1985.
The SBAM survey also found that 91% of small businesses believe providing health insurance is crucial for employee retention and satisfaction, but 84% stated these costs significantly affect their expenses. Moreover, 83% reported that health care costs impact their ability to invest in other business areas.
Calley advocates for a shift towards value-based care as a solution to control health care spending. He criticized the current system for incentivizing infrastructure expansion and utilization rather than focusing on patient outcomes. “Today we have a system that incentivizes building more infrastructure…and that’s the most expensive way to do it,” he said.
The value-based care model would reimburse providers based on patient outcomes rather than service volume, promoting prevention and efficient care.
“Small businesses more than anything need the entire system itself to move toward this value-based reimbursement method,” Calley concluded.
