Small employers seeking to offer robust major medical coverage to employees and their dependents face daunting price and transparency hurdles. Employers with 50 or fewer full-time equivalent employees, so-called “small groups,” have historically been relegated to state small-group markets, which are underwritten based on a carrier’s collective claims experience in a state. Employers with more than 50 employees but fewer than, say, 100 to 150 employees, face similar challenges. Large groups are underwritten as one group, usually on a consolidated basis, with all employees charged an equal amount, but the leverage approach requires transparency.
Over the past two decades, the small-group market has experienced a steady and long-term decline, owing principally to a combination of rapidly rising costs and a near, if not total, lack of transparency. In 2002, approximately 47% of small employers offered health insurance as a fringe benefit, compared to 30% in 2023. Large-group underwriting for these “smaller” large groups tends to be opaque, leaving employers with little or no control over plan costs. Both groups have increasingly sought out alternatives.
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