Small businesses with 2-50 employees are a growth engine for the American economy, continuing to grow year over year. However, fewer of these employers are offering health insurance. The percentage of firms offering health benefits dropped from 59 percent in 2012 to 53 percent in 2016.1 At the same time, medical loss ratios have increased in light of the introduction of an 80 percent minimum threshold and the rising cost of care. Carriers face a dual threat of decreasing enrollment and rising medical costs, forcing them to re-evaluate the way they do business.
Impacting the medical cost trend requires participation of a wide variety of stakeholders, many of whom the carriers cannot directly impact. Therefore, carriers are more likely to try to reduce administrative spend categories, where there is more that they can directly influence. The broker channel, given the high cost of commissions, is a frequent target. In theory, if carriers adopt a direct-to-employer sales model, they can cut out the middleman, thus improving service and eliminating commissions.
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