Small and medium sized businesses (SMBs) are the core of the US economy, and present a significant market opportunity for health insurance brokers and agents. Even though SMBs are historically less likely to offer health insurance, they want to. Just like larger businesses, SMBs see health benefits as a key part of recruiting and retaining top employees.
SMBs have been a difficult market for insurance brokers, as many SMBs have been unable to afford the traditional small group policy, and in the past there were few alternatives. However, new solutions such as defined contribution health benefits are opening the SMB market back up to health insurance brokers.
This means that with the right health insurance solutions, such as defined contribution solutions, health insurance brokers have the right tools to diversify and grow their book of businesses in this changing health insurance market.
The Formidable SMB Market Opportunity
The terms “small business” and “medium business” can mean different sizes in different contexts or sources. For the purposes of this discussion, a small business employs fewer than 50 employees and a medium business employs fewer than 200 employees.
SMBs make up the majority of US employers, with 77% of employers (5.7 million) employing fewer than 50 employees. Small businesses and medium businesses combined account for approximately half of all jobs, more than 40% of private sector payrolls, and 65% of new job creation.
Source: Employer Health Insurance, Facts and Figures 2013
Over 2.3 Million SMBs Do Not Offer Health Insurance
Specific to health benefits, only 35% of US small and medium businesses offered health insurance in 2012 (< 200 employees). That's over 2.3 small and medium businesses who did not offer health insurance in 2012. And, the smaller the business, the less likely they are to offer health insurance. For example, in 2012 ~30% of businesses with less than 10 employees offered health insurance.
Source: Employer Health Insurance, Facts and Figures 2013
Small Businesses Want to Offer Affordable Health Insurance
When surveyed, most small employers offer health insurance because of a moral obligation (44%) or to recruit and retain talented employees (33%).
And, of the small businesses not offering health insurance, the majority (61%) say cost is the primary reason.
Additionally, small businesses who don't offer health insurance may be shopping. Of SMBs not offering health insurance:
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A third shopped for health insurance from 2009-2011 (but did not buy). This dropped to 15% in 2012.
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Between 15% and 27% offered health insurance in the last 5 years.
Source: Employer Health Insurance, Facts and Figures 2013
Key Take-Aways for Health Insurance Brokers
To summarize:
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The SMB market offers huge opportunity for health insurance brokers who adapt, especially in the < 50 employee space.
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SMBs want to offer health benefits, but the cost of a traditional small group policy has been prohibitive to many SMBs.
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Just because SMBs don't offer health benefits doesn't mean they're not shopping. Many of these prospects just need to be presented the right solution, and many have offered health benefits in the past.
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Health insurance brokers need new health benefits solutions, including defined contribution health benefits, to take advantage of the market opportunity. Defined contribution provides SMBs an affordable health insurance solution, and provides health insurance brokers a new product for increasing individual health insurance sales.
What opportunities do you see in the SMB market for health insurance brokers? Leave a comment.
