The Engine of the Local Economy
Small businesses are everywhere, too. Driving up Walnut in Murphysboro these days, you’ll find shop doors open, restaurants busy and people out enjoying their day. It’s all the business you don’t see, too; all the small companies off Main Street and working at the kitchen table or in a home office. It’s the company of three writing innovating AI software, it’s little research or marketing groups, franchise owners and wholesalers.
In fact, one thing’s for certain and two are for sure: 99% of all businesses are small business. Small business is the engine of the local economy, and for healthy towns, cities and states, we need small business to thrive.
With 99% of EINs owned by small employers, almost 50% of employees are working at small companies. A company of 43 people down in Tucson deserves the same quality insurance that people working in Seattle or Chicago can access because while costs of goods and services are connected to zip code, let’s get real here: Health care is expensive everywhere.
Large employers have historically been able to offer strong benefits at a lower cost than what is available for small businesses. More money is not always more problems. Larger employers have staff dedicated to benefits, they can offer supplemental products like Virgin Pulse or Spring Health and they can customize health plans.
Small employers can’t dedicate resources to benefits the way a large employer can. Small groups must trust that what they get is the best deal, and the reality at this time in the market is that there aren’t many deals to get, let alone good ones.
Even when it’s affordable, the number of choices isn’t there. Believe it or not, there are years where we see decreases, or an under 3% rate change. It’s not unusual for an employer to get a low renewal but not be happy with the coverage and seek to make changes. Also not unusual is that same employer unenthusiastically accepting renewal simply because there are no other choices.
The small business market is at a point where changes are inevitable. Covering a family continues to increase, 2024 saw the same 7% rise as 2023. Folks are left paying more per month, there are far fewer options for carrier and plan design, and many plans being written as HDHP, without first dollar coverage. Pre-tax savings is great, when people have cash to save. The small group market is ready and wanting innovation in health insurance, not a reissue of old paper.
Big Changes are Coming for Small Business
Alternative funding is poised to come widely to small business. Kaiser Family Foundation reports 20% of workers at small firms are covered by a self-funded plan, and 36% of small groups are offering level funded coverage. These funding methods are no longer structured to favor large companies. There are smart tools built into the products and with more companies recognizing that alternative funding may need a little bit of attention each quarter but the trade-off is more customization and much savings.
Self-funding used to mean long quarterly meetings in a boardroom, and employers paying close attention to claims each month. It still does, but it’s sure gotten easier and more accessible. Forward-thinking products and markets are designed and being refined for small employers. It’s mission driven companies that recognize that insurance isn’t working, and health providers aren’t rolling back pricing.
It’s companies like ClearPoint Health building markets specifically for small employers and creating captive solutions. It’s vendors recognizing gaps in the market and wanting to close those in a way that connects small businesses and their employees with smart programs. It’s innovators bringing AI to insurance, layering in another view into how the small group market can be best served, in all aspects of sponsoring health insurance – cost, product, and efficient delivery.
It's small employers getting a chance to offer competitive insurance to great candidates, nowhere near Chicago.
By: Sarah Wides, Growth Associate