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Helping small employers compete: new options in health insurance purchasing

There are more than 7 million small businesses in the United States1; of the 5+ million companies with fewer than 50 employees, about half offered health insurance in 20142. This is even lower among the smallest firms, with only 44% of companies with 3-9 workers offering insurance.

And, while these firms do not face legal penalties under the Affordable Care Act for failing to offer health coverage, it does place them at a disadvantage within the employee market. In fact, the Employee Benefits Research Institute points to the importance of the benefits package in attracting employees. For example, in a recent survey, most employees (88%) said that health care benefits are extremely or very important.3

Combined with decreasing unemployment, this can place small employers at a distinct disadvantage when it comes to hiring (and retaining) the best employees.

My home state of Minnesota provides a good microcosm to understand the dilemma, and to see examples of solutions. The state has one of the lowest unemployment rates in the country—3.7%–contrasting with the national rate of about 5.5%. And the state has a diversified business community with high demand for knowledge and creative workers. As I hear it from employers, competition for top candidates can be intense, and retention is an ongoing consideration. In this setting, small employers face even greater challenges.

To learn more about how employers are adjusting their strategies, I talked with Jason Hammond and Jon Thompson at Bolster in Minneapolis. They’re a small firm—around a dozen people—focused on helping clients build brand engagement with their customers. They compete against larger creative agencies for the best talent, and need to appeal to Millennials when making their job offers. In the past, they provided some funds for benefits that employees could use to purchase insurance, but had found that the overall experience did not make their employees feel supported. This became their number one goal in looking for a new coverage strategy. Their search for a new approach was rooted in a desire to improve their offering to employees, to get the most from their investment in benefits, and to have a system that was easy to use both as an employer and for employees.

They started by interviewing their employees, and found that no two people had the exact same set of coverage needs. But they did all share a desire for a user-friendly experience that included help if they had issues with their insurers, with signing up for coverage, or any other logistical challenge. This was a big deal—good software was only part of the story; part of their need was for access to helpful people to call for help.

Not surprisingly, the market is stepping up with new ways to address these needs. Gravie is one such service provider, operating within a complex environment of public and private exchanges, health insurer marketplaces, and broker/consultant sales approaches. CEO Abir Sen describes Gravie as an alternative to the traditional employer-based benefits market. It provides a vehicle for employers to enable their employees to obtain coverage from a marketplace, thus providing a broader range of options than the employer could otherwise offer. Gravie also brings an explicit focus on the user experience, integrating some of the most complex aspects of ACA exchanges, such as determining eligibility for public subsidies, into an easy to navigate system.

Gravie describes themselves as an advocate for the consumer. Their payment model is based on payment coming from the company that provides the services, such as health insurance, that the consumer selects. Sen emphasized that this approach removes incentives to recommend options that would benefit Gravie at the expense of the consumer. This was echoed by Bolster, that this is “more trustworthy…it seems like a no-brainer.”

Employers—large and small—are looking to ease the burden of administering benefits. As Bolster noted, if they save 2-3 hours per week on HR administration, that time goes straight back into their business. This advantage has also been noted by large companies on the move to private exchanges.

What are the take-aways from Bolster’s experience? For small employers, there’s a call to action to explore new options for providing benefits to your employees. It can be affordable for you, easy to administer, and give you an advantage in the competition for the best teams. For brokers and benefit consultants, new entrants like Gravie need to be taken seriously, and you may need to improve your tools and service levels to remain competitive. For health insurers, companies like Gravie provide opportunities to broaden your distribution network. And for companies that offer voluntary benefits such as dental, vision, pet, or disability insurance, this may open new avenues to reach potential customers. One thing is sure: change in this vital market will continue, driven by regulatory, technological and demographic shifts, so all players need to keep their eyes open and be willing to change with it.

Liz Reyer is Vice President of GfK’s Financial Service. For more information you may contact her at


1. Includes companies with less than 100 employees; Source: County Business Patterns, 2013

2. Source: Employer Health Benefits, 2014 Annual Survey. Kaiser Family Foundation and Health Research & Educational Trust


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