Agent Answers

Health Insurance Solutions for Small Businesses Facing High Costs, Competition, and Less Choice

Written on June 16th, 2021

Often referred to as the “backbone” of the U.S. economy, small businesses are critical job creators and produce about one-third of the U.S.’s export value. According to the 2020 Small Business Profile (the most recent available), small businesses employ 60.6 million people, comprising 47.1% of all U.S. employees, and account for 99.9% of all U.S. businesses.[1]

Small businesses are most likely to have 20-99 employees[2] and face some unique challenges when it comes to balancing employee benefits and their bottom lines, including:

Many small business owners turn to trusted health insurance brokers to help them navigate their options.[3] We’ll discuss all of these challenges – and solutions – in more detail below so that you’re prepared to help your small group clients overcome their challenges.

Do you have a small group client who’s finding it difficult to obtain affordable health benefits for their employees? Let a dedicated group specialist help!

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Product Fit Quick Reference

The table below provides a quick overview of how different health insurance products can fit the needs of small employer groups.

Advantage to Small Groups Level-Funded Health Plans (underwritten) Fixed Indemnity Plans Group Gap (Guaranteed Issue)
Add Plan Choice + Customization
Lower-Premium Options
Help with High OOP Costs
Retain Key Employees
Attract part-time workers

Increasing Healthcare and Insurance Premium Costs

Like most companies, small businesses feel the squeeze when it comes to increasing healthcare costs and higher premiums year over year. In fact, 37% of small business owners reported that the cost of providing health care coverage to employees was their biggest challenge as a small business owner in a 2019 survey.[4]

What this means: Many small business owners attempt to stabilize premium increases (and the costs for their business) by adding to employees’ out-of-pocket costs.

In fact, 48% of small businesses reported that they’ve increased deductibles or copayments for employees to help control premium costs.[5]

Health insurance solutions when businesses need to lower out-of-pocket costs: In addition to considering level-funded plans for younger, healthier groups that may be able to qualify for lower premiums than a fully insured plan offers, group gap options can help employees pay for higher out-of-pocket costs, whether from an ACA-qualifying group or level-funded group plan.

Quote Group Gap

Smaller Pool of Insured Employees, Lack of Plan Choice

After cost, lack of choice in healthcare plans was cited by small business owners 43% of the time as the biggest challenge in obtaining coverage for their employees. Rising costs of prescription drugs was a close second at 40%.[6]

What this means for small businesses: ACA group plan designs just don’t work for a subset of businesses, especially those with fewer employees or whose employees tend to be younger and healthier.

Younger, less experienced employees may have smaller paychecks and need to take home a larger portion of their pay. They may also have fewer medical conditions, so asking these employees to pay a portion of an ACA group premium may not make sense for them or the business.

Health insurance solutions when businesses need plan choice: A qualifying level-funded plan rather than an ACA group plan may be a good option for a smaller group (typically 5-75 full-time employees).

These plans offer employers more customization since they’re exempt from some ACA provisions, so employers can obtain levels of coverage and cost-sharing that fits their employees’ and their business needs.

Quote Level-Funded Plans

Attracting and Retaining Talent is a Challenge

Reliable, talented, and hard-working employees are critical for the success of any business, yet 25% of small businesses surveyed indicated that attracting and retaining quality employees was their biggest challenge.[7]

What this means for small businesses: Most people who don’t qualify for Medicare or Medicaid still rely on their employer for their health coverage.[8] Without a health benefits offering, it can be almost impossible for smaller businesses to compete with larger firms to attract talent.

And for industries that rely on a part-time or seasonal workforce, being able to offer lump-sum critical illness and accident benefits through a fixed indemnity plan could help companies stand out from the competition when recruiting and retaining good employees.

Health insurance solutions when it’s difficult to attract or retain talent: Level-funded health plans can include salaried employee or management carve-out options for a company’s key personnel.

Group fixed indemnity accident and critical illness benefits may be an affordable option to offer part-time or seasonal workers, along with individual Gap, Vision, and Dental Benefits.

Quote Group Critical Illness + Accident Plans

No HR Department, Difficulty Shopping Benefits Annually

An additional logistical challenge that many small businesses face is having to make decisions about health insurance quickly but also lacking the time and resources to really understand policy information to help inform their decision.[9]

Only 43% of small business owners have access to an internal human resources (HR) department to help make health benefits decisions, while 69% rely on health insurance brokers.

What this means for small businesses: Small businesses often must rely on outside professionals, typically a health insurance broker, for help navigating group health and other benefits like disability income, group life insurance, and dental. Small business owners tend to have a favorable view of health insurance brokers with 92% reporting them as “helpful”.[10]

Health insurance agents are the solution when a small business needs professional help: As an independent broker, you can partner with IBG to grow your group portfolio and retain more group clients with our best-in-class technology including INSXCloud, innovative product offerings from reliable carriers, and solutions-based approach.

Best of all, when you partner with IBG, you keep your clients and all the commissions. IBG just works with you in the background to help identify the right solutions for your group clients.

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Next Steps for Agents

Since a majority of Americans still obtain their health coverage through their employer,[11] health benefits will continue to be top-of-mind for job seekers and small businesses looking to attract and retain talent.

It’s essential that brokers be familiar with level-funded, fixed benefit lump sum critical illness and accident plans, and group gap insurance to help small business owners address the unique challenges they face.

If you have a group that’s facing a significant rate increase or you want to shop away from the fully insured market to see what’s available, request a group quote, tell us a little bit about the situation and an IBG group specialist will be in touch to discuss options.

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