The New California Gold Rush

California’s revolutionary expansion of the small group employer category has greatly increased new business opportunities for brokers who adapt to the healthcare reform-driven marketplace. As it played out, this year, the Golden State is one of only four (including Colorado, New York and Vermont) that moved forward with the Affordable Care Act’s (ACA) expanded definition of a “small employer” to one with 100 employees (up from 50 or fewer). In late 2015, federal legislation gave states the option to stay with the preACA definition, but California continued forward since the provision had already been incorporated into state law.


The expanded small group classification is a game-changer. The market once consisted of independent grocers, auto repair garages, local restaurants, dry cleaners, beauty salons, and other small businesses – many with only a handful of workers. Now it has grown to encompass companies, such as financial services firms, car dealerships, retail, food and service franchises, as well as many others that have a larger, more diverse group of workers. The result is profound for the small group segment. Employers are seeking to identify, select, and manage health benefits for an increasingly disparate workforce while managing costs and financial risks. They are also trying to navigate a web of ACA mandates to ensure compliance with regulatory requirements and avoid penalties. Despite these challenges, the expanded small employer market creates exciting opportunities for brokers to expand their business by serving as insurance experts and skilled curators of plan benefits and options.


While data varies between sources, such as the U.S. Census Bureau and the U.S. Small Business Administration (SBA), the number of private-sector businesses statewide that fit the new small group criteria is estimated to be about 500,000 small businesses. All told, these firms employ some five million people, according to the SBA. According to the latest California labor market data, newly added companies and employees in this small group category include around 33,000 employers and about 2.3 million employees. Note the math here. The expansion has nearly doubled the number of affected employees. This represents a lot of businesses and workers who must navigate unfamiliar insurance territory and a multitude of new compliance requirements. They need industry experts to make the best choices possible. More small employers are grappling with the vast array of choices and plan options to address a complex, challenging, and diverse employee base. This is no easy task. For example, a 22-year-old single woman who is starting her first job out of college will probably want a different plan than would a 59-year-old financial services manager who has a spouse, three children, and plans to retire in the near future. Brokers and benefit advisors have the know-how to manage the complexity for these new employers.


The days when it was simply about enrolling people in coverage are quickly fading. Brokers need to help small employers and workers understand the intricacies of public marketplace, private exchange, and small business carrier options. Savvy agents play an even larger role in providing invaluable services after enrollment. To address small group demands, successful agents will focus on six key roles that now define the broker-small business relationship:

1. Consumerism Guru: Businesses need a reliable guide, given the increase of many new exchanges, technology platforms, and online services. Also many have recently entered the small group category. They need a specialist, an advocate, and a problem solver to negotiate the changing health exchange and marketplace options – options that are becoming increasingly comparable to how the financial services industry provides 401k offerings. Employers need a trusted resource and counselor who clearly understands the new market environment.

2. Advisor to Small Groups: Small businesses rely on health benefits to attract and retain the best workers. Restauranteurs, hair stylists, and machinists are skilled in their respective industries, not health and employee benefits. They face the daunting task of finding the right coverage options at the right price to meet a wide range of needs and requirements for their diverse group of workers. Without the steady hand of a professional advisor, it can be difficult to target optimal coverage options.

3. Service Provider: The ACA has been a catalyst in automating a variety of traditional broker functions, such as plan comparisons, enrollment, physician selection, and more. This trend actually deepens the value of skilled agents. There are a number of reasons why, but they all track back to one vital factor – service. Brokers who help small businesses navigate healthcare reform offer tremendous value. They can help manage health care costs, keep up to date on regulatory requirements and changes, and assist with benefit administration and employee benefit education. They listen to the needs of each business, match those needs to the best marketplace options, provide quotes for coverage, and place the business with the program that offers the best options.

4. Human Interface: Several years ago, IBM commissioned a poll of 1,000 U.S. consumers and found that, when it comes to insurance providers, there is an overwhelming preference for personalized service and human interaction. Technology has enabled the seemingly overnight explosion of online insurance marketplaces. But brokers who can deliver outstanding service support to their customers will win in the long term. Nothing beats face-to-face interaction that is timely, personalized, and valuable to clients.

5. Single-Point Expert: A benefit specialist must be a go-to expert to solve their clients’ problems, meet their needs, vet and recommend coverage options, and guide workers through benefit claims processes. The value of a singlesource expert cannot be overstated. A good broker satisfies all of a small business’ needs, whether it’s health, life, dental, payroll, or other benefit services. Not having to deal with multiple vendors and contacts saves time, money, and the sanity of employers and workers.

6. Problem Solver: Brokers should also be entrusted problem solvers. Few benefits are as important to employers and their workers as health coverage. Small businesses are perhaps more acutely attuned to this as they must try to compete costeffectively with their larger counterparts for talent. Health coverage is a primary trigger for recruitment. It is critical to put this very important benefit in the hands of a professional who can be trusted to make informed decisions.

Moreover, brokers today must solve some of the trickiest benefit coverage puzzles. Since they do not directly represent a carrier, exchange, or marketplace, they should focus on serving client needs rather than selling to a specific (and often narrower) selection of plans. Brokers must sift through options and present the best, unbiased choices that match their clients’ employer-worker needs. Their primary motivation is to serve, not sell.


The bottom line is that the expansion of the small group has created more options, flexibility, and opportunity. But pitfalls are everywhere for employers attempting to go it alone, especially those that are new to the category. There is a greater demand for benefit professionals who offer service and ongoing, customized support that goes far beyond initial enrollment. In the small business community, there is a greater demand for advisors who can target the best range of options while identifying health plans that fit an employee’s individual needs and stage in life. Small business owners need professionals who offer healthcare coverage expertise and deliver service with a personal touch. This is where smart, knowledgeable, and service-oriented brokers and professionals have the most to gain.

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