SMBs providing better benefit packages than larger employers

Opportunity is knocking for producers across Main Street U.S.A., suggests a Zenefits report based on data from more than 8,000 of its small and medium business customers with fewer than 100 employees.

SMBs are contributing nearly 25% more than legally required to their employees’ monthly premiums, covering on average 73% of the total cost, the report found. They also contributed 38% toward premiums for dependents. The average employee’s monthly premium for family coverage was $1,168.

Tim Cerimele, employee benefits practice leader at Zenefits, finds the results heartening. These businesses “are taking more responsibility in offering and promoting group health insurance as a tool for their employees, which could create a more competitive environment,” he says.

Smaller firms are facing pressure to offer additional coverage, he adds, due to “an unstable individual market,” which is preventing employees from procuring coverage through other traditional routes, like small group health plans.

Regional differences
The report also pointed to several regional differences. Premium costs are lowest in the Midwest and highest in the Northeast, whose employers contribute the most toward dependent premiums at 43%. West Coast employers contribute the most toward individual premiums at 80%.

With a 49% adoption rate, Preferred Provider Organizations are the most popular type of SMB plan nationwide. PPOs are considered more flexible in terms of provider access, network size and out-of-network coverage.

Zenefits plans to provide more specifics on different industries, states and regions in future reports. Likewise, “We will be including information on other lines of benefit coverage such as dental, vision, ancillary and tax vehicles” Cerimele notes. The HR software company is also considering reports on compensation and hiring trends.

Josh Bersin, principal and founder of Bersin by Deloitte, Deloitte Consulting LLP, agrees with the Zenefits report’s bullish assessment of the SMB market. “Even if healthcare costs increase,” he says, “the social contract between many employers and employees remains strong.” He predicts that employers of all sizes will continue to contribute significantly to healthcare benefits to attract and retain top talent as the job market continues to heat up.

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Whereas many brokers and advisers might have been inclined to make smaller groups a lower priority or avoid them altogether, over the past few years, Bersin thinks that’s no longer the case. “SMBs are a segment that we see opportunity in,” he says. “It’s becoming a hot market for brokers and advisers to grow their business.”

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