What's the Best Way to Shop for Health Insurance?

Health insurance is the single most critical benefit for employees and their respective employers. Eighty-six percent of employers admit that health insurance is critical to their workforce, and 83% of employees believe healthcare is a "very important" consideration for whether they remain at their current job. Unfortunately, providing world-class health insurance is getting increasingly costly for small and mid-market businesses.

This puts SMBs in a tricky position. You need to secure affordable benefits that don't restrict your growth and cash flow, but you also need to find comprehensive coverage that helps attract top talent to your organization and prevents attrition issues. To accomplish this, your business needs to secure health insurance from one of the following five sources:

1. Insurance Carriers
2. Healthcare Exchange
3. Agents
4. Broker
5. Professional Employer Organizations (PEOs)

Here's the secret: only one of these methods can reduce your premiums without impacting your coverage.

How Health Insurance Premiums Are Set

Let's dispel a myth: you will not get superior premiums by working with an insurance carrier, agent, or broker. In fact, you won't find significant variability in premiums outside of specific factors. The federal government heavily regulates health insurance premiums, which are impacted by a convergence of federal subsidies, regulations, and unique laws.

Health Insurance Premiums CAN Be Influenced By:

• The number of employees on your payroll (i.e., risk pooling)
• The age of your employees and their dependents
• Tobacco use
• Your location
• The size of your employee's family

Health Insurance Premiums CAN NOT Be Influenced By:

• Your industry
• Claims history
• Gender
• Medical history

In other words, whether you work directly with a carrier or utilize the services of a broker, you will pay the same premiums.

The Problem with Purchasing Directly from Carriers

As a small business owner, you're under pressure to find the best possible benefits without sapping your liquidity. Fifty-six percent of employees remain at their job solely due to their health coverage, and 27% of people have turned down a job because they didn't think the health benefits were competitive. So, it can be tempting to call your insurance carrier and negotiate alone. 

However, manually tracking down benefit information can take days. Not only will you have to communicate with multiple carriers to compare prices and plans, but you'll need to financially compare those benefits while still considering services and your competitive advantage in the talent marketplace. Furthermore, you may not find all the options available to you — simply because you don't know where to look.

Massive enterprises can hire people to specifically scout down insurance. You can't. Trying to purchase insurance directly from carriers can sap your time, money, and may leave you with a less-than-desirable health plan.

A Comparison of Health Insurance Shopping Models

Let's look at (and compare) the four primary ways that you can shop for health insurance outside of carrier contact:

Healthcare Exchanges over Direct Purchasing

The Health Insurance Marketplace (i.e., the Healthcare Exchange) helps individuals, families, and small businesses easily shop for plans. The main draw of the marketplace is that it creates uniformity. Plans are organized into bronze, silver, gold, or platinum, and you can quickly compare plan specifics. However, there are some serious drawbacks. For starters, you have to do the shopping. This means manually comparing plans, diving into accounting details, and trying to formulate cost vs. benefits scenarios for plan prices, coverage, and competitive agility. 

Agents over Healthcare Exchanges

Health insurance agents help enroll your business in "best-fit" plans. There are two primary types of agents: captive and independent. Captive agents work for a single health insurance provider, and independent agents work for a handful of providers. Either way, they both share one thing in common: they get kickbacks from insurance providers. Since agents cannot legally charge you for their services, they make their money on commission. This incentivizes them to oversell you on insurance or give you sales-driven information about a specific provider.

However, there are some pros to agents. They do the legwork, and they compare plans for you. This gives them a distinct advantage over the marketplace — since you will have an entity acting on your behalf.

Brokers over Agents

Unlike agents, which often work directly with insurance companies, brokers work for you. They aren't associated with any specific insurance provider(s), and their sole goal is to find your business best-fit insurance plans. However, they suffer the same flaw as agents. They're paid on commission. The Affordable Care Act doesn't allow either agents or brokers to accept a fee from your business. They make money from the insurer. Brokers don't have specific allegiances to insurance companies. However, they are incentivized to oversell you on insurance plans in a market where insurance premiums are inflating at twice the rate of the US dollar.

PEOs over Brokers

When it comes to health insurance shopping, Professional Employer Organizations (PEOs) are the only solution that both works for you directly and doesn't operate on commission. 

In addition to working directly with your company to find the perfect health insurance solution for you, PEOs are the only partner that can reduce your premiums. Remember, the only factors that influence initial premiums are age, tobacco use, location, and (most importantly) the number of employees you have. PEOs are able to pool employees from all the businesses they partner with together. Not only does this reduce your premiums, but it helps you acquire better benefits for that lower cost. On average, small businesses pay 8 to 18% more for health insurance than large companies. PEOs eliminate this difference in cost.

The Best Way to Shop for Health Insurance

You have plenty of options when it comes to finding health insurance for your business. But you only have one option that helps you find the right health insurance for your business at the right cost. PEOs bring best-in-class health insurance plans to your business at lower costs than your competitors. In today's hyper-competitive talent landscape, your health insurance plan isn't just a lifeline to cost-savings; it can single-handedly help you win top talent in your industry.