New episode: How to suc­ceed with small­er employers 

Matt 00:01

Hello, and welcome to Assurity’s Focus on Voluntary Benefits. I'm your host Matt and I am excited to welcome Eastbridge Consulting's Ginger Bates back to our show. Ginger is Eastbridge's Director of Research Services. And she first came on the show about a year ago to dive into some of the data she gathered about generational demographics and their insurance buying habits. It's a great episode, so check it out if you haven't already. This time, we're taking a close look at the small case voluntary benefits market. And despite the name small cases make up a big piece of our industry. We're so glad to have you back ginger and to leverage your expertise to learn more about this vital market. Thanks for joining us, and welcome to the show.

Ginger 00:38

Thanks, I appreciate you having me back.

Matt 00:41

Let's start a little bit by talking about the small case voluntary benefits market and the opportunity that it presents both worksite benefit specialists and health brokers looking to work with employers who want to help their employees with rising out of pocket costs. When we talk about the small case market, who are the employers and employees we are talking about just to set the stage?

Ginger 01:01

Well, to give you some context Eastbridge defines the small case market as employers with under 100 employees. So within that under 100 segment, there really two different groups. One that there's important for you to keep in mind because sometimes they act a little differently. There's the 10 to 49 employees group, and employers with 50 to 99.

So I bring that up because both segments are considered small case. But there are some differences between the two. And I'll try to highlight or make note of those in our discussion as we go along. But just looking at the numbers, according to the US Census Bureau, just under 1.2 million businesses in the US employ between 10 and 99 employees. So when we look at the employer market, we sort of segment out the under 10 Group, which is a large group in the US, mainly because most volunteer carriers don't work with that under 10 market, it's more of a specialty market.

So when we look at that we look at 10 and up. And that 1.2 million is representative of that 10 to 99 employees. So that's a huge chunk of businesses. And they represent about 91% of the US businesses that employ 10 or more employees. That also equals about 26% of all employees employed, which is about 30 million people. So the vast majority of that 1.2 million, all but about 130,000 is in the 10 to 49 employee size category. So in general, the 10 to 49 and 50 to 99 employer category have a lot in common. But the 50 to 99 is often can often have some medium and large employer traits.

So if it makes sense, it sort of straddles the fence between the two. And I'll make note of that. But that gives you a sense for the size and sort of the content of that small group category for our conversation going forward.

Matt 03:20

That's some really vital contex to have as we go forward in terms of understanding this market. And I'm really glad that you broke it out in terms of the small and the small to medium kind of sizes in there.

So in terms of the size of this market, not in terms of the number of small employers, but in terms of the potential premium that this market holds. What is the opportunity there? And how much potential premium does this does this market contain?

Ginger 03:47

Well, the short answer is there's a lot a lot of opportunity. The small case market is the most under penetrated the coordinate our research, only about 57% of the smallest employers that tend to 49 segment offer at least one voluntary product to their employees. The 50 to 99 segment is up to 74%. But it's still lower than those that have 100 employees or more, which is really close to 80% or more. Or actually, I think the 100 to 500 under 500 is a little over 70 close to 80% and the rest are over 80%.

So you can see that those have are under penetrated both those two small market and so with the large number of employers in those and the fact that more don't already are for offer voluntary. That to me is equation for opportunity. And we know that these employers are open to offering voluntary benefits they know their employees need help just like any other employee at a large organization or medium sized organization and they're open to offering voluntary benefits.

So in our employer surveys that we've done, we always ask questions about the likelihood of making benefit changes in the past, we've asked employers every year or every survey that we've done, what's your likelihood of making benefit changes in the next 18 months? In 2020? Because we're in the middle of the pandemic, we altered the question a little bit and asked the likelihood of changes, making changes specifically related to the pandemic to see how, you know, it was affecting benefits, decisions. And interesting, we got some interesting results 26% of those from the 10 to 49, employee category, and 47%.

So almost half of those in the 50 to 99. Employee category said they are likely to either add a new volunteer benefit, or move some existing benefit to voluntary, both of which were higher than in the 2018 employer study, which we just asked the likelihood of making the changes in the next 18 months. So interesting results, that the pandemic certainly was getting juices flowing in terms of thinking about adding new volunteer benefits or switching existing benefits over to voluntary So that equals opportunity as well.

One thing to think about, though, the only area that did seem to be impacted by the pandemic, or negatively, is the increased number of employers who said they were considering dropping some benefits. So that increased a good bit of cross employer size. But to me, that number also represents opportunity, in some ways, because there's an opportunity there to have a conversation with an employer about a volunteer solution to possibly mitigate the need to drop any kind of benefit that they might be contemplating.

Anyway, that's a long way to answer just there's a lot of different pieces to that opportunity. So the market is under penetrated. They're in the mode, and in the thought process of making an open to making benefit changes. So all of that, to me equals opportunity.

Matt 07:18

Indeed, it sounds like there's a lot of chances to really break into what seems to be a market that's receptive to voluntary benefits, and in some cases, seems to be actively searching for them. So other than this, this lack of penetration into the small case market, what are some of the differences that we see comparing small employers to larger groups? Do they have any specific needs that they that they're trying to address when they're providing benefits to their employees that we wouldn't see in some of these medium to large sized employers?

Ginger 07:48

Well, you know, there's always some differences, not nothing. We shouldn't approach anything as a one size fits all. But the needs and expectations of small employers are really becoming more and more like those of larger employers and are as based on our research, from enrollment methods to administration, or voluntary products offered, the differences between small employers and larger ones are disappearing.

They're slowly disappearing, though, and I think that's an important distinction. They're not there yet. And there are some differences, but it is they are making their way, especially, you know, in technology and things like that, which we'll talk about later, I think. But you know, the good news is that this means it's becoming easier from a carrier broker standpoint to meet their needs, with some of the same processes that you use for larger businesses.

So just like larger employers, they're trying to meet their employee needs, and they want it to be an easy process for them. I don't think that that's a big aha. And we all know that, but it's a good reminder to ourselves to know that we need to remember what their motivating goals for offering voluntary are to meet their employees needs and, and to to have it be an easy implementation. So some of the research that backs us up for in regardless of employer size, the primary reason for offering voluntary is employee interest in the products. So, from small, medium to large, their main reason for offering is because the employees have expressed interest in having these benefits in the 10 to 49 size category. They follow that in their top three after employee interest with addressing gaps in their plan or offering more benefits for employees and offering employees important the opportunity to buy higher amounts of coverage.

So, again, not you know, any huge revelation there but key to know those things. So that you know what the conversation is going in and what they're looking for and trying to accomplish. For the 50 to 99 group, employee interest is still number one. But they follow that, in the top three with addressing financial well being of their employees and ease of administration. They also rank a little higher cost savings to the company, reducing 401k withdrawals and replacing benefits the employer used to contribute to so they had some additional things that that that came in higher. So again, those are some of the differences between the two, the ease of administration being a little bit more important for the for the 50 to 99 group, and the 10 to 49 group, everything that they mentioned is very employee centric, in terms of their reasons for offering,

Matt 10:52

I think it's so, so important to bring up the goals and the rationale of these employers and selecting voluntary benefits and their reasoning for adopting them. Now on top of that, to build on to it, what products do these decisions lead them toward? Are there certain products that smaller employers tend to gravitate toward?

Ginger 11:13

Well, I can tell you about the top voluntary products that are currently offered by small employers. The top three voluntary products are long-term disability, AD&D and Critical Illness for the 10 to 49 category, and long-term disability, Accident and Whole Life for the 50 to 99 category.

But we also asked about nontraditional, you know, products like identity protection, legal pet insurance, that kind of thing. And identity theft is the most frequently offered among both small employer segments on the nontraditional side and other nontraditional benefits we asked about, you know, that we hear a lot about these days. telemedicine, obviously, is one that's been around a while, but took on greater importance during the pandemic, financial wellness programs and tools and purchasing programs. All those types of things are more likely to be offered as the size of the employer grows.

So small employers are less likely to currently offer that. But we also ask them, are you interested are likely to offer these types of benefits in the next one to two years. And small employers are just as likely as large employers to be planning add one or more of these types of nontraditional benefits over the next year or two. So you know, those, those are the kinds of things that they're currently offering things that they're interested in offering in the future. So you can see that, you might think it's sort of more one dimensional and a small employer shot, but it's really not. They're trying, if you go back to why they're offering them to meet those employee needs, they're really looking at all options.

Matt 12:52

Yeah, definitely interesting to see the growth in those nontraditional segments there. But as you mentioned, a huge factor in the benefits that these smaller employers are choosing to offer is what their employees want. So among the actual employees that these companies are their differences and the attitudes toward voluntary benefits, or how they view them, compared to larger employers?

Ginger 13:17

Not really not a lot of different some employees have this really tell us the same things, regardless of employer or size of why they purchase reasonable costs, not a big surprise that that's number one, the product helps fill their personal needs. And the third is it helps fill gaps in their primary medical coverage that they have. So those are the top three regardless of employer size.

But there are some differences though, in terms of and I'm thinking of how they learn about voluntary benefits, not just why they purchase. When asked about their preferences for learning about their volunteer benefits, more employees and smaller companies prefer to speak with someone in person compared to larger employers, and indicate that group meetings with other employees are helpful to them and learning about their employers benefit offering.

So there you know, is more interest on the smaller employer side to have some of that interaction and be able to speak to someone whether that's in person, which, you know, we're learning relearning how to do that in a different way, perhaps, or whether that's via video, web chat, those kinds of things, being able to talk to someone versus just doing it on your own.

Matt 14:42

That's a that's really interesting to note there, especially as we just talked to Bonnie Brazil in our last episode, and she indicated that virtual enrollments of all stripes are certainly on the rise as a result of the covid 19 pandemic. So that'll be really interesting to keep in mind the interaction between those trends as we look at the small case market. So in terms of what these employees want, are there any products that they're searching for, and that the employees are actively in the market for that either aren't offered? Or are rising in the number of being offered right now?

Ginger 15:19

Well, I mean, we asked a couple different questions in our employee survey. One was, which product categories do you think are most important? What are most important to you?

So we asked them to rank that on a scale of one to five, and we had 12 different categories. There were more general, medical, dental, prescription drug all the life as a whole, not just, you know, not broken out into term or whole life, but in disability as a general category, also included accident, critical illness, all those things. But you know, they not surprisingly rate the highest those core medical those core products gives me medical, dental, prescription drug vision and my products as the most important, but out of the 12, none of the 12 were right at less than a three and important.

So, you know, they're, you know, employees understand and know the importance of all these different types of products, not just, you know, they know the importance of having a medical coverage, and that obviously comes in first, but accident and disability income, were ranked exactly the same in the 10 to 49. Employer group, in terms of importance. So, you know, those are important things to remember. But looking at it a different way. We also ask those who don't currently own a product on a voluntary basis, if they would be interested in purchasing it in the future on a volunteer basis.

And the folks in the 10 to 49 category are most interested in purchasing critical illness, cancer, long term care, hospital indemnity and identity protection. And employees in the 50 to 99 category cites similar interests, but favorite pet insurance over identity protection. So while most of the core products are deemed most important, overall, core meaning medical, dental, prescription drug life, your more traditional group type products. You know, employees and smaller size employers Express really robust interest in purchasing more traditional volunteer products like accident, critical illness, cancer, hospital indemnity, and the nontraditional products like pet insurance and I.D. protection to again, help fill those needs that they fill those gaps that they mentioned, their personal needs this the very reasons that they gave for purchasing ball and other voluntary products in the first place.

So for both small employers as categories, the percentage of employees interested in purchasing almost any product on a volunteer basis is robust, especially in the 10 to 49. Employer category, which we would expect because it has lower penetration, and it also has the highest number of employers that offer just one voluntary product to their to their employees. So that's not a surprise that they would be even more interested in buying other products.

Matt 18:28

I think that's just very indicative of what we know. And I'm sure you in our audience know as well, just the importance of insurance protection in so many areas in life, and the demand for it amongst all sorts of consumers. But also in the space, there is intense competition, as I'm sure I'm sure our audience knows as well between brokers and carriers, when they're, they're presenting these offerings to different employers. So what are some of the top factors that small employers consider when selecting a broker or carrier to go with for their voluntary benefits.

Ginger 19:02

I don't have data on selecting brokers, but I do have data on select from carrier. So what it will say is that small employers interestingly, you typically use between two and three carriers for their voluntary benefits, which is the same is the that's the most common response for all employers is two to three carriers. Now, larger employers maybe have a higher percentage of using more than that, but two to three is sort of the sweet spot.

And small employers follow that follow that trend. And they choose them really for the same reasons price and value, ease of administration and carrier help with enrolling. So you know that carrier help with enrolling can mean a lot of different things. And we can interpret that in a lot of different ways. But certainly technology would be involved in that maybe actual, you know, help with the enrolling process. Boots on the ground, so to speak, lots of different ways to address that.

But other factors and the top five reasons why they choose a carrier. For small for the smallest employer, the 10 to 49 category, they listed claims integration across all products. And clients integration is a really hot topic right now in the industry. And they also listed in their top five, the availability of tools, calculators and benefits, advice for their employees to be able to make good decisions, the 50 to 99, their top five, in addition to the first three that I mentioned, were the reputation of the carrier overall, and the availability of self-administration.

So, you know, there, again, some differences there. And some commonalities between those two. And, you know, all of those things are important to employers. And, you know, I think that the key takeaway is, again, this is not something that our, our audience doesn't already know. But it's important to make things easier and solution oriented for the employer, regardless of their size. So that sees the administration helping them meet additional employee need benefits, needs and gaps, you know, all those things. that I think are the reasons they choose carriers, because of the solutions they can provide, not just from a product standpoint,

Matt 21:32

Always. And I'm really glad there, Ginger that you brought up technologies and tools, because over the last several years, especially in 2020, Assurity has invested in enhancing our technologies and processes to make that business easier for brokers and small employer clients and large employer clients. Like how important are things like enrollment platforms online quoting systems online claim submission, and the like two brokers focused on the small case market? I know you mentioned it slightly there. But are you seeing that interest rise?

Ginger 22:04

Oh, absolutely. I think you know, small employers are very open to technology to help with a variety of processes. The small employer category, it is important to note that the small employer category still has the highest percentage of employees enrolling via paper process.

But with that said, when asked what their preferred future benefits enrollment processes, process would be all employers as categories, including both of those small categories indicate that a self-enrollment process via a website or mobile device is the most preferred. So while there are still more people doing using the paper process, or, you know, less of a technological process, and the smaller employer size group categories, they're migrating there.

Go back to my statement earlier, those differences are disappearing, they're slowly disappearing, and they're making changes. So having that as a carrier, those technologies available already to help them get there is incredibly important. So also, you know, if they have a benefits administration system, which 70% of small employers say, tell us that they do already have an admin system in place. They want things to be coordinated with that system as well. And when we asked them about online services, that are important to them, in terms of for them, as well as their employees, almost a quarter say that they would not even select a carrier that doesn't offer on-line administration.

So you know that that's a little surprising. It's much higher, obviously, for the larger employers as well. But you know, fewer about round 5% say that having online administration doesn't matter to them. So they know what that looks like. It may be pieces and parts or just one portion of your online or technological capabilities that they're able to use, but they want something they're all very much in tune with online and technological, you know, processes and help for their benefits process.

So like larger employers, a majority of small employers also say that the capability for employees to view specific benefits online file claims, check the status of claims online, it's all critical to them. We asked them, what are the critical services and there were hardly any that we listed that weren't. At least 50% of the employer said we're critical. About half say that the ability to adjust and pay the billing online is critical.

So I guess the answer to your question Yes, technologically driven processes are a must for any broker approaching any employer, even the smaller sized employers from now on. So again, with the caveat that you have to meet them where they are, come alongside them, and help them get to where they want and need to be.

Matt 25:16

I think that really aligns with what we've seen heard over these last couple of years. But something that that hasn't really been talked about as these digital processes and online tools have risen in prominence, to your point, the changing expectations. Now, digital service is, as you said, a must for many employers and brokers alike. In terms of the growing use of technology and enrollments. Are there expectations of brokers and carriers that were there not just a year or two ago?

Ginger 25:49

Well, you know, I think employers the general trend, as you mentioned, they've been moving toward more online enrollment methods for the last few years. But I think the pandemic provided clarity on a lot of things, and certainly pushed all employer sizes to, you know, try to accommodate a remote workforce and moved more in that direction of online enrollment methods if they weren't already there.

But, you know, when we ask employers about plan changes, the thing that I mentioned earlier, to voluntary enrollment plans, because of the pandemic, the smallest employers were the least likely to say that they would make a change because of the pandemic. But yeah, that didn't, that doesn't mean that they're not willing that a lot of them aren't going to make changes because 22% of the 10 to 49 said that they plan to move to an online self-service enrollment, and 39% of the 50, not 50 to 99, employers said that they were moving to this method.

So there, again, it sort of provides evidence to that slowly disappearing part, they're making changes, they're a little less willing to make changes, may not have the resources, perhaps they may not think they have the resources to do that. But they know that they need to make it and are beginning to be willing to make those changes. So is those differences between those smaller and larger employers in terms of the technological needs are disappearing? And I think the research supports that. So it's definitely increasing just a little slower. process.

You know, and I think that sometimes brokers are there still believe that small employers are not interested in using technology, but that nothing that we have done research on says that that's the case. Because remember, when we, we ask small employers, we ask all employers about what they will prefer for their future online enrollment process. And about half of all small employers said they wanted to have an online enrollment process for the future. And many, in fact, made that move in 2020.

Matt 28:13

It's good to see that that playing field leveling a little bit there, and I think it makes it easier for brokers who aren't necessarily used to selling small cases to use some of the tools and processes they've developed for larger cases to make that transition.

Ginger 28:26

Well, I think, too, you know, it's, you have to keep in mind, as I said, and the brokers know this, because they know their clients, that small employers, you know, they wear a lot of hats, they typically have fewer human resources on the benefit side. So, you know, trying to make things run smoothly for them. From enrollment through administration, is key and technology is typically at the heart of making things run smoothly these days. There's just no getting around it.

Matt 28:54

That is so, so true. I think this really brings us to some of the big questions, especially for our audience, those that are maybe going to help them to see results. So when a broker is approaching small cases, how should that approach be different when selling voluntary benefits in this market compared to the large larger and medium sized cases?

Ginger 29:18

Well, as I've stated already, I think it's all about making things simple for the employer while allowing them to offer or more robust benefits package for their employees. I know that doesn't sound necessarily profound or new, but it's nonetheless true. You know, focusing on price or even features and benefits is not in my opinion, the key to winning their attention.

You know, first the employer has to feel like it will be simple and easy to implement. And then they can focus on the product specifics pricing cetera. So sometimes, you know, you go in, you know, a larger client may be more focused on the pricing side. Perhaps or spreadsheeting products, that type of thing. But really meeting the small employers where they are and helping them understand what you can do to help them to make it easy and not another thing to do on a long list of things to do with fewer resources than that, then that's what you want to try to focus on. The key areas that small employers mentioned. And we asked about the biggest administrative pain points that they experience are important to keep in mind from the from the get-go, the top three for both of the small employer categories are getting product setup on an enrollment and ben/admin system. 70% of them tell us that they do already have a bin admin system and getting those products set up helping them do that is a big pain point for them.

Also, aren't listed are billing problems and claims payment problems. So you know, those things are can really bring things to a screeching halt. As I'm sure again, our broker audience knows, and having the tools and the processes in place to make sure that those things go smoothly. are, you know, to me the keys to success for the small employer group market?

Matt 31:30

And a lot of those factors that you mentioned are in least in some way influenced by the carrier that is being offered as well?

Ginger 31:37

Absolutely.

Matt 31:38

Are there concerns that you've seen the brokers have, or that they should have when choosing a carrier for small case groups?

Ginger 31:46

Well, I think a lot of brokers who focus on the small case market often sell, you know, medical and employer funded products to those clients as well. So their biggest fear, I think is you know, when first introducing volunteer to a client is that there will be an issue with the voluntary that will jeopardize their other business. So brokers have to pick carriers that will help keep them keep things simple and relatively problem free for their clients.

So you know, not surprisingly, when brokers are asked about the most important carrier selection criteria, they rank administration and service as the most important, along with product features and benefits, you know, benefit brokers place a higher emphasis on price benefit burgers are the ones that that we categorize as those folks that are your more traditional benefit brokers versus voluntary worksite. brokers. But they place a higher emphasis on price. But both say the integration with enrollment and admin needs of the client are really, really important to them.

So it does, you know, it all sounds familiar, employers want those same things. And the broker responses reflect those employer needs and requests. So I think that kind of speaks for itself, making sure that the carrier has those tools in place. And as you mentioned, Assurity has invested in a lot of those technological processes and tools to have available. And making sure that those goes smoothly and are implemented, is very important to the broker so that they don't jeopardize any other business that they have, you know, in place at the employer.

Matt 33:34

That makes a lot of sense. And I think you've given us and our audience a lot to think about. Is there anything more that you'd like to add about the small case market? Ginger, before we wrap up today?

Ginger 33:45

No, just to reiterate that, you know, there are while there are differences. There, you know, the differences are, are going away between the small and the larger groups, especially because, you know, one of the main reasons is that technological platforms and admin firms are really pushing down market, you know, and really, really has some hot penetration and continue to focus on that small employer market as well. So they're catching up, and brokers and carriers have to do the same to be able to meet them where they are.

Matt 34:28

I think that's great advice. Well, Ginger, I would like to thank you once again, for taking the time to show up today and give us give us your advice and insights on the small case voluntary benefits market, I think our audience is really going to get a lot from that. So thank you very much. We really appreciate it.

Ginger 34:46

I hope it was helpful. And thanks for having me again. enjoyed being with you.

Matt 34:50

Of course, and to our listeners. Thanks for tuning into Assurity focus on voluntary benefits. If you'd like to learn more about Assurity and our voluntary products, you can visit assurity.com You can also email us at podcasts at a surety command we'll be happy to connect you with the sales team in your region. If you'd like to learn more about Eastbridge Consulting and their research, you can visit them at eastbridge.com. Thanks for listening,