Key Takeaways
Small and medium-sized businesses (SMBs) form the backbone of the U.S. economy, yet many struggle to afford traditional group health insurance
A lot of small businesses have budget constraints and are unable to keep up with the annual rise in healthcare costs for their employees
Buying processes are complex and small businesses struggle to complete the journey due to lack of information and options
Businesses that are in the start-up phase do not always have a large number of employees and cannot meet the minimum requirements for group plans and the discounts they may offer
Small businesses need custom health options as they have a diverse workforce, their employees may be on contract, be freelancers or engaged part time
Traditional health care plans are at times limited to specific geographies while the workforce has gone remote and global.
Fully insured plans are expensive but take the burden of financial responsibility and claims away from the employers
Self insured plans put the fiscal responsibility of claims on the employer
Non-traditional self insured plans that are not ‘insurance’ create more affordability and flexibility for employers
Brokers should help employers choose flexible non-insurance health plans beyond the traditional self-insured plans vs fully funded insurance plans
What employers prioritize when purchasing healthcare for employees
The key interest of employers interested in purchasing healthcare is not the health and wellbeing of employees, rather it is in acquiring and retaining employees for brand loyalty through provision of benefits. Most employers are interested in short term healthcare commitments – annual plans and not multi-year renewable insurance policies.
Small business employers especially cannot predict the financial health of their firm and so want to avoid any long term commitments. This means they are not focused on wellbeing rather short term cost control. That is why carriers for health insurance provide businesses with the lowest year-to-year premium increases-which is what brokers then sell.
This creates an economic axiom: short term cost control in health leads to higher long term costs. However, when brokers begin to change their messaging and show that short term cost control means higher cost for preventive or maintenance treatments in the future they will begin to show efficiency. They will be promoting plans focused on health and wellness which is what the employee is looking for.
Because carriers compete on short term cost control, not on long term cost control, they provide policies that have high premiums and deductibles for out of network treatments causing financial burden on the employees-leading to lower job satisfaction.
Understanding the unique challenges SMBs' face
According to the Small Business Administration most businesses in the US, around 99.9%, are defined as small businesses and account for employing 61.7 million Americans, totaling 46.4% of private sector employees. Yet, this SMBs sector faces many challenges including acquiring and retaining talent due to the lack of benefits they may offer when compared to larger firms.
According to Holly Wade, Executive Director of NFIB’s Research Center, “Health insurance has been a continuous challenge for small business owners. The cost of health insurance is by far the biggest challenge for employers who offer health insurance and for those who do not offer it. Small employers compete for talent in filling open positions and are aware that health insurance is an important benefit for many employees and job seekers.”
In a highly turbulent healthcare landscape, the role of a licensed health insurance broker can help employers and HR staff find plans that are affordable and meet the employer mandates set by The Affordable Care Act aka Obamacare.
Pain points for businesses can include
1. Budget constraints
SMBs often operate on tight budgets, making traditional group health insurance premiums impossible to afford.
2. Participation requirements
Many insurers have minimum participation requirements for group packages, making it difficult for SMBs with fewer employees to qualify.
3. Employee needs
SMBs need solutions for diverse employee needs and preferences, from millennials to baby boomers, immigrants without social security to contractual workers. Insurance agents can have agreements with health insurance companies and try to sell those same insurance plans to employers, without educating employers and HR teams on their options. Brokers don’t have such limited choices and should play a role beyond just sales.
When brokers begin to stay on top of the trends and use tools and comparisons of alternatives to traditional health plans on the market they will be able to alleviate some of the financial burden on small businesses.
Helping employers navigate the health plan buying process
According to Michael Thompson, National Alliance president and CEO, "Employers are frustrated that the health care system is designed to enrich the middlemen and is not delivering improvements in affordability, access or quality for purchasers or employees and their families…Increasingly the fox is guarding the henhouse, and both are exploiting a dysfunctional system at the expense of making it better. Employers are starting to take actions, both on the market and policy fronts, to realign the system to reduce conflicts and improve value."
64% of SMBs use a health insurance broker to understand the intricacies of the buying process. However, only 36% would consider using the same broker due to lack of satisfaction with the buying process. The main challenge for them is the service provided is not comprehensive and there is not much after sale support to help business owners who already have too much on their plate.
While more employers and businesses have begun to do their own research even as they use brokers and independent agents to help support their health care needs. It is the brokers that should step up their game and support HR managers and finance managers to educate them by understanding the business needs and then finding tailored solutions that address budget constraints, participation requirements, and employee preferences.
A February 2024 KFF Health Tracking Poll shows about half (48%) of insured adults say they are worried about affording their monthly health insurance premium. This rise in health care costs means brokers and businesses need to work hard to help employers understand their options.
New healthcare reform updates for SMBs and compliance requirements, including reporting, disclosure, and regulatory changes should be monitored and employers should be offered tools and resources to help SMBs compare different health insurance plans and make informed decisions.
Brokers that support small businesses in helping find affordable plan options should stay on top of changing trends and health care alternatives. Ancillary plans may be a dime a dozen but there are new options for comprehensive plan coverage at a fraction of the cost of traditional insurance.
Best Alternatives To Health Insurance
Health insurance alternative | Definition | Best fits |
Subscription | Individuals and businesses choose a monthly plan that fits their budget. There may be some co-pay depending on the plan and service chosen. | Those looking for no deductibles and low copays at an affordable monthly cost. |
Christian Cost Sharing | A christian-based cost sharing program where it works like a co-op. Members pay a monthly amount that pools into an accumulated account which can be used by any member. | Individuals that are religious and want affordable options to traditional health care. |
Discount Cards | Programs that offer specific services through the use of discount cards e.g Pharmacy | Underinsured, no insurance or workers that do not get employment insurance coverage. |
Fee for service | Indemnity insurance that pays a fixed price regardless of the cost based on services received. | Those focused on preventative and wellness programs and do not need regular maintenance health provider visits. |
Why brokers should promote self-funded non-insurance health plans
As the economy continues to be turbulent in the wake of the pandemic, employers whether large or small are looking to reduce healthcare costs. Businesses with less than 500 employees predict they will not be able to afford healthcare costs for their employees in the next few years.
When brokers offer alternative health care plans that are self-insured vs. fully insured, they allow the small to midsize business to offer a more customizable and affordable approach to healthcare coverage for their employees.
Self-funded insurance | Fully Insured |
Employers have financial control | Status quo for traditional insurance |
Promotes data transparency | No visibility into usage of plan |
Offers up to 85% variable costs | Pay one monthly premium |
More flexibility and personalization to design plans | Specific packages with high annual hikes |
Lowering costs with self-funded non-insurance health plans
When businesses take control of their health plan they can lower their costs. Since self-funded plans are built on flexibility brokers can suggest employee surveys to understand the needs of the workforce. Building packages around workforce needs can lead to savings, especially when you base plan changes on actual insurance claims data from within your company. It also leads to employee satisfaction with the health plans.
Fully insured plans have fixed premiums but high deductibles reduce employee satisfaction due to increased personal expenses.
In fully insured plans, insurers manage the risk which may seem lucrative in the beginning but with no visibility for employers into the employees’ claims experience, there is no way to optimize it.
Self-funded insurance on the other hand places risk management in employers’ hands, but they also take on the risk of higher claims which is not always acceptable or affordable.
Non-traditional health plans bring in the flexibility businesses need to offset risk and create a model that provides a safety buffer. These plans are flexible, not insurance based but have the advantage of moving beyond the cookie-cutter approach to your plan.
The Case for flexible non-insurance health plans
Cost Efficiency
Non-insurance health plans provide cost efficiency. In contrast to the need to pay fixed premiums, employers can save when they pay a fixed monthly cost to maintain a healthy workforce.
Customization
Non-insurance health plans allow employers flexibility to design benefits that align with the needs of their workforce. This enhances and promotes better satisfaction among the employees. Employees can even choose what they need for their healthcare rather than having to opt for traditional packages that still require high deductibles.
Optimization with data
Non-insurance health plans give employers the insight on usage of the plan so that they can customize the plans in the future and optimize their cost saving while maintaining employee satisfaction.
Risk management
Non-insurance health plans provide protection against high claims, and make health benefits accessible to smaller employers allowing them to compete with larger organizations when trying to hire employees.
The Broker's Role in guiding employers
Brokers are uniquely positioned to assess the specific needs and risk tolerance of each employer and then provide them with the choices to the most suitable health plan options.
By promoting non-insurance health plans, brokers can:
Educate employers about the misconceptions of self-insurance and traditional health insurance.
Provide more customizable solutions that align with the company's financial budget while maintaining employee wellness goals.
Navigate the marketplace and connect business owners with vendor partners.
Analyze data to continually refine and improve the health plan.
Non-insurance health plans that are more comparable to flexible self-insured plans provide cost efficiency, customization, and control. Brokers can work to become a partner to their clients and create a longer term relationship by ensuring they provide the businesses with what they need without compromising on employee welfare.
Vativis medical discount plans are an alternative to health insurance.