How SMBs buy health benefits

A wide range of small and medium-sized businesses (SMBs) can be found all over the country today, from local bakeries to vintage bookstores. Not only do these businesses add a unique charm to their community, they also give millions of Americans jobs. In fact, according to the U.S. Small Business Administration, there are 31.7 million small businesses in the U.S., employing 47.1% of U.S. employees.

While SMBs are the reason millions of Americans are able to take home a paycheck, many owners aren’t able to offer their staff a full employee benefits package, including health insurance.

With the cost of traditional group health insurance plans rising high enough to concern large employers, it’s no wonder SMBs can’t find the funds to enroll in a plan for their employees. Because of these challenges, SMBs have to approach buying health benefits differently.

In this article, we’ll cover the unique challenges, characteristics, and considerations SMBs make when shopping for health insurance, and how health insurance agents and brokers can use these insights to successfully cater to their clients.

1. SMBs are more risk-averse

The first thing to know about how SMBs shop for health insurance is that they are far more risk-averse than their larger counterparts. This isn’t surprising, given that many owners started the business themselves and have personal skin in the game.

This personal investment in their business heightens owners’ risk awareness and sensitivity to financial risk management. In fact, CNBC reports that more than a third of small business owners dipped into their personal funds to keep their business afloat in 2020.

So how do you help owners overcome their fears when it comes to investing in a health insurance plan? When selling health benefits, it’s essential to show that you are credible and trustworthy to do business with. This will help reassure them that their money is being wisely spent and eliminates any risk they may be concerned about. By offering a health insurance benefit, like a health reimbursement arrangement (HRA), business owners will be able to retain top employees and attract top talent to work for them and help grow their business.

2. SMBs want high return on investment

Second, while all business owners want a good return on their investment (ROI), SMB owners are especially concerned about getting the most bang for their buck, simply because every dollar counts.

SMB owners will often have a lot of questions about how a health benefits plan will specifically benefit them and their employees. How much coverage does the plan offer? What is the network availability? How do the copays and deductibles compare to other plans?

As a health insurance broker, answering these questions with a focus on ROI and the value the owner will receive for their investment will make them far more likely to feel good about the plans you choose for them.

3. SMBs make personal business decisions

Next, it’s important to remember that not only are many SMB owners making health insurance decisions for their employees, but for themselves and their family as well. Unlike many large employers, SMB owners will ultimately become a consumer of the plan they’re selecting.

Given this personal investment in the plan, SMBs may be doing a lot more of their own research with considerations for what’s best not only for their business, but what’s best for them and their family. They weigh how decisions will impact not just their business’s bottom line, but their own personal health needs.

When guiding an owner through their plan selection, it’s important to get to know them not just as a business owner, but on a personal level as well. Ask them what they value in a health benefits plan, and what’s important to their family. By learning more about their personal health insurance wants and needs, you’ll be able to find the right plan for them that much quicker.

4. SMBs have a highly centralized buying process

Finally, as SMB owners are getting close to making a decision, you’ll notice that the final buying decision is often highly centralized, with a smaller number of people involved in the health benefits decision-making process.

Common buying teams may include only a small leadership team, or even just the owner. With less people involved in the decision-making process, it’s easier for you as a broker to move them along the buying process.

What’s more, with less people to rely on to help them make the decision, owners may rely more on you for your advice and insight than a larger employer would, so be prepared to share your personal recommendations to help them make a final decision.

This article was originally published on August 21, 2013. It was last updated August 27, 2021.