Crunching the numbers

The report is based on data from 3.4 million employees and 85,000 employers—all from businesses with 250 or fewer employees.

Employers and individuals alike have struggled in recent years with inflation and fears of a recession. In health care benefits, premiums have continued to rise. In 2022, individual premiums for all SMBs saw a 21% increase from 2018, with family premium increases at 17.87% over the same time period. The report noted that this rise over four years comes to an additional $1,248 for individual policies and $2,772 per year for family plans.

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Those higher costs may be hurting smaller businesses more, the report said, with larger SMB companies (those with 51-250 employees) seeing an increase in health plan enrollment, while smaller groups (1-50 employees) saw a decrease.

In addition, more than half of employees from SMBs waive health plan coverage altogether, which raises questions about the affordability of plans. Reid said the report's finding points to the importance of partnering with insurance brokers and consultants in getting the most bang from the health care buck.

"[SMBs] getting good advice are using more innovative solutions that allow them to make their dollars go as far as a large corporations' dollar-spend on benefits," he said. "Those who are bypassing a consultant and purchasing benefits through, say, their payroll vendor are generally seeing fully insured, off-the-shelf plans that increase in cost more quickly. Because benefits are second only to pay when an employee chooses an employer, this creates a challenge for SMBs. The good news is there is an answer. The bad news is word has not gotten around to all SMBs."

Benefits brokers who succeed will be the ones who stay out in front and offer benefits that matter to their clients – all while minding the bottom line, said the report.

HDHP enrollment growth

Reid also underscored the importance of finding the right benefits mix; noting that lifestyle benefits that go beyond health, dental, and vision can make employers more attractive to workers. The report noted that lifestyle benefits such as financial wellness, legal services, and pet insurance continue to score highly with employees.

The use of high deductible health plans (HDHPs) continues to be a mixed bag, the report suggested. Although growth in enrollment was significant, at 68% year over year, HDHP enrollment remains a small segment overall. The report found that HMOs account for roughly 47% of SMB employee health plan enrollment, PPOs had 42%, and HDHPs were at 6%.

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According to Reid, offering HDHP plans alone may not be enough. "Unfortunately, one of the reasons employees migrate to the HDHPs is because, due to very high deductibles, they are the lowest cost," he said. "It is critical that an employer offer a collection of voluntary benefits to 'insure' this gap because not all of these employees can afford to put away 100% of the deductible."

The study also found a slight dip in employee contributions to short-term disability plans—at the same time that premium costs of those plans increased, at almost 12%. Reid said employers are taking on a higher percentage of those short-term disability costs. "Income protection became top-of-mind during the height of the pandemic, and now with an aging workforce and chronic conditions rising in U.S. adults, short-term and long-term disability coverage is a prudent part of the overall benefits mix," he said.

Reid added that benefit offerings of smaller businesses are too often overlooked in industry reports, but that Ease has been focused on that segment. "The report's goal is to help benchmark against premium costs, contribution data, or even shifting plan makeup," he said. "Brokers and employers can see how they stack up from a business or competitive standpoint and hone in on wins or gaps. For example, the average number of voluntary benefits plans being offered by this cohort is 3.61. And if you're a company sized 2-250 offering fewer than this, now is the time to reevaluate your offerings to remain competitive."