Every day we speak with health insurance professionals navigating the health insurance market and building their business plan for 2014, 2015, and beyond. The Affordable Care Act (ACA) introduced uncertainty and challenges for brokers. However, there is also significant opportunity for those brokers who can adapt to the evolving market space.
In this article, we dispel four small business health insurance myths we hear from health insurance professionals every day.
Myth # 1: Small Business Owners Aren't Interested in Offering Health Benefits
Truth: Small business owners want to offer health benefits for the same reasons as larger businesses (morale, recruiting and retention, healthy workforce, etc.), but they struggle to afford traditional health insurance.
Studies show that the smaller the business, the less likely they are to offer health insurance. For example, while 98% of all larger businesses (200+ employees) offer health insurance, less than 50% of all micro employers (< 10 employees) offer health insurance.
That's over 2.3 million U.S. small businesses who don't offer health insurance. But they want to! The primary reason they don't? Cost (source).
Tip: Don't write off small businesses who are not offering health benefits. Instead, be able to offer them alternative health insurance solutions such as "pure" defined contribution or a private exchange.
In fact, small businesses (< 50 employees) who do not offer health benefits are the ideal type of company for a "pure" defined contribution solution.
Myth # 2: Small Business Owners Plan to Drop Health Benefits to Lower Costs
Truth: Small business owners are trying their best to protect their employees, even in these challenging and uncertain times. According to a 2013 study by The Hartford, only 17% of small business owners said they expect to reduce employee benefits. However, businesses - small and large - are re-thinking how to offer health insurance. The current way is too expensive and unsustainable.
For example, small business health insurance costs have nearly doubled since 2009, with 91% of small businesses reporting increases in their health plan at their most recent health insurance renewal. To deal with these rising costs, 34% of small businesses report holding off on hiring a new employee while 12% report they had to lay off an employee.
Tip: Small business owners do not want to drop health benefits all together, but they are looking for alternative ways to offer same or better coverage at a sustainable and affordable cost. Use alternative solutions such as defined contribution to retain clients dropping their small group plan.
Myth #3: A New Small Business Won't Offer Health Benefits
Truth: Business just starting out are more likely than older small businesses to start offering health benefits.
A LIMRA survey found 14% of small businesses that are one to nine years old anticipate adding benefits compared to only 2% of firms that were more than 20 years old.
Tip: New businesses and young start-ups can be great prospects for health benefits, especially alternative solutions such as defined contribution that allow them to "buy in" at an affordable and sustainable cost.
Myth #4: Most Small Business Owners Already Have a Broker
Truth: Only half of small business owners say they have been contact by an agent or broker recently. And, small business owners say they value (and want) a health benefits advisor.
This need for a trusted advisor is expected to grow. According to an October 2013 LIMRA survey, 94% of small businesses said they believe the need for an outside health benefits advisor will increase or stay the same in the next two years. This was especially true for (1) businesses with 10 to 25 employees who are still establishing themselves, and (2) small businesses actively looking to expand. Most said they are "almost definitely" going to be seeking advisors in the next two years.
Tip: Don't assume small business owners already have a health insurance broker. Small business owners are looking for trusted advisors to help them understand their health benefit options and health reform. Approach small business owners with a consultative approach, focusing on education and problem solving.
Opportunity for Health Insurance Professionals in 2014
The ACA presents both opportunities and uncertainties. Yet, health insurance professionals are needed to help consumers and small businesses navigate the changing regulations, health plan choices, and enrollment process.
But to be successful health insurance professionals need to adapt. Brokers with the right expertise and solutions can successfully tap into the formidable health insurance buying power of small businesses in the post-ACA market.