Small businesses are ready for better health insurance options and tools

Overview

Small-and mid-sized businesses (SMBs) employ about half of the U.S. workforce and play a vital role in economic growth. Yet, many SMB leaders face significant challenges in offering sustainable health benefits, including median reported premium increases of 18%. This research, based on a survey of 1,023 SMB health benefits decision makers, highlights the ongoing need for solutions that make health care more accessible and transparent for SMBs, supporting both business growth and employee well-being.

Key findings

1. Smaller businesses are disproportionately impacted by health care costs. Nearly one-third (30%) of SMBs with fewer than 50 employees report that health insurance costs are worsening their business situation, compared to 22% of larger SMBs. Smaller firms are less likely to take action to offset rising costs, often because they are not required to offer coverage and may drop it altogether.
2. Most SMBs prioritize preserving benefits, even at the expense of their business. 71% of SMBs have taken steps in the past three years to respond to rising costs, such as implementing wellness programs, reducing spending elsewhere, or shifting costs to employees. Cutting benefits is often considered a last resort.
3. A wide majority are interested in new or alternative coverage options, but need stronger support and clarity. 85% of SMBs believe there may be valuable options they haven’t explored, and 78% say more information could change their choices. However, 77% feel the disruption or uncertainty of alternative options outweighs potential savings.
4. Many SMBs struggle with unclear health insurance information, driving interest in digital and AI tools. 89% would invest time to learn new tools if they made plan selection easier, and 75% believe AI-enabled tools could reduce reliance on outside experts. Still, only 12% currently rank AI or chat tools among their top decision resources.
5. Brokers remain critical, but pricing and financial incentives complicate decisions. Over half of SMBs are working with or considering brokers, but 20% have switched brokers and 53% have considered switching. A lack of transparency about broker compensation makes 51% of SMBs less confident in their decisions.

Key considerations

• Adoption of alternative coverage options must be driven by awareness, decision support, and clearer cost and coverage expectations – reducing perceived risk and uncertainty of employee impact.
• AI and digitally-enabled tools should be developed to help SMBs make health care decisions with greater confidence – backed by trusted data and unbiased input.
• Next-generation broker relationships must be built on trust and aligned incentives structures that reward long-term client outcomes over short-term fees.

Read the full report here.