Less than one third of small businesses currently offer health insurance to their employees.

Among large employers - companies with 500 or more workers - that number is 96%.

That gap isn't because small business owners don't care about their people. It's because the cost of health coverage for small employers is structurally higher, the options are fewer, and the entire system is stacked in ways that favor businesses with the purchasing power to negotiate.

On May 5, the National Federation of Independent Business (NFIB) submitted a formal statement to the U.S. House Committee on Education and Workforce, laying out exactly who they think is making this worse: Pharmacy Benefit Managers, or PBMs.

What a PBM is and why you should care

A PBM is a company that acts as a go-between for insurance plans, employers, and pharmacies. When your insurance plan includes prescription drug coverage, a PBM is usually managing that coverage behind the scenes.

Here's the problem: PBMs profit from the difference between what they charge health plans and what they actually pay pharmacies. They charge the plan one price. They pay the pharmacy less. They keep the difference - a practice called "spread pricing."

Translation: the middleman has a financial incentive to keep drug costs high, because higher costs mean a larger spread to skim.

For large companies with robust HR departments and negotiating power, PBMs can often be held in check. For small businesses buying coverage through a group plan or the open market, there's essentially no leverage. The price is the price.

What NFIB is asking Congress to do

The statement NFIB submitted this week urges Congress to:

• Ban spread pricing. Make PBMs charge health plans the same price they pay pharmacies, eliminating the profit motive to inflate costs.
• Reform the Medical Loss Ratio (MLR). The MLR is an Affordable Care Act rule that requires insurers to spend a certain percentage of premiums on actual medical care. NFIB argues the rule has contributed to industry consolidation - fewer insurers, less competition - which has ultimately hurt small businesses.
• Increase transparency. Require PBMs and insurers to disclose what they're charging, what they're paying, and what they're keeping.

The underlying ask is simple: make it possible for small businesses to actually afford to compete for employees the same way large companies do.

Why this is a competitive issue, not just a cost issue

When a large employer offers comprehensive health benefits and a small employer can't, the small employer is at a disadvantage in hiring. This is especially acute in skilled trades, healthcare support roles, and any sector where labor is tight.

The NFIB frames it this way: "Small businesses will continue to be in an impossible position - operate their business or provide health care for employees."

That's a real binary for a lot of owners. The business or the benefits. You can't always do both.

What this means if you run a small practice or healthcare-adjacent business

If you're already in healthcare - a small clinic, a dental practice, a home health agency - you're doubly exposed. You pay the same inflated drug costs as your patients, and you also struggle to compete for staff with larger hospital systems that can absorb the cost of premium benefits.

PBM reform wouldn't fix everything. But it would change one of the structural inputs that keeps small employer health coverage unaffordable.

The NFIB's full statement is available on their site. The House committee hearing that prompted it is focused on expanding health care access and affordability broadly, but NFIB made sure small business was represented specifically.

What you can do right now

Talk to your broker about alternatives. Association health plans, Health Reimbursement Arrangements (HRAs), and ICHRA (Individual Coverage HRAs) are all options that give small businesses more flexibility than traditional group plans. They're not perfect, but they're options most small employers don't know exist.

Consider a HRA as a bridge. With an HRA, you give employees a fixed monthly allowance to buy their own coverage. You control the cost. They get benefits. It's not a full group plan, but it's something - and "something" matters when recruiting.

Contact your representative. NFIB has a take-action portal. If PBM reform is something you believe would help your business, this is a moment when the issue is live in Congress.

Source: NFIB statement submitted to the U.S. House Committee on Education and Workforce, May 5, 2026 - "Small Businesses Demand Increased Health Care Transparency, Flexibility, and Affordability" (nfib.com). NFIB PBM statement PDF (nfib.com).