The top 3 things changing in small group insurance distribution

There are many players in the small group insurance space – some old and some new.

Brokers understand the small group market because they deal with the owners and members of small groups every day.

Health plans know that small groups come to them for insurance but see growth in that block more as a function of distribution and less a function of internal health plan technology or automation.

Investors see the aggregate value of a 10 life group when you get to scale and pure-play technologists know how to build scalable platforms.

Technologists delivering new SaaS solutions today understand the small group market through the eyes of investors or health plans.  What they don’t see is all the turmoil that occurs before a new group shows up wanting to enroll in a health plan.

Many investors, health plans and technology entrepreneurs are starting to realize the work before the work of enrolling groups in health insurance and other lines of coverage significantly limits the ability of platforms to scale.  Here are the top three things that are the focus of the sector now:

1. Quoting and proposal tools for brokers are a cost of doing business

Owners of small groups don’t care necessarily about insurance – they care about their business and many care about their employees.  Each year, approximately 70% of small businesses that offer health insurance to their employees wake up like many of us did in college the day of the big exam.  “Oh no!” they exclaim, I need to figure out health insurance for my employees.

It is often December, usually the first week but sometimes the last week and they have precious little time to find the right insurance, determine the cost, collect enrollment information and send in their binder payment to lock coverage in for their employees.  For years now companies like Limelight Health and Wellthie have been helping brokers respond to these employers by automating the collection of rate information and the presentation of options for their groups.  This is a daunting task which until just recently was done by hand, in Excel and sent via email.  The problem is that employers don’t often know what they need to tell a broker to get the right quote and brokers are too busy in the last month of the year to spend the appropriate amount of time with each group to make sure things go well.  Moreover, quoting and proposing is a cost of doing business.  You can’t buy something if you don’t know what it costs or what its benefits are.  There’s no measurable increase in a brokers ability to scale their business because of efficiencies in quoting and proposing because the bottleneck just moves downstream.


Prediction #1:  Platforms providing quoting, proposing, enrollment, and administration will eventually prevail.

2. New group on-board is overlooked by almost all solutions

If you’re unfamiliar with how insurance sales works here’s a quick primer.  First, an employer needs to decide what they want to offer.  Second, the employer needs to fill out the Group Application which contains things like the group demographic information, banking information for remittance of premium payments, etc.  Third, the application, along with other supporting documentation (which varies by carrier by state sometimes) is sent via email, fax or old school mail to the carrier.  Fourth, the carrier needs to review, approve and set up the group on their system(s) and issue a unique ID for the group often called a Group ID but the name varies a little.  Fifth, the employer needs to collect their employees benefit elections and Sixth, those elections need to be sent to the carrier so they can set them up on their system(s).

Now, this is a grossly oversimplified outline of the process but the key takeaway is the Group Application process.  Few carriers have an automated process for this step so even if you automate the quoting piece and the enrollment piece, getting the group setup and the Group ID is a huge bottleneck that has crushed the dreams of brokers and platforms alike.


Prediction #2:  Solutions that partner with health plans to remove complexity, update the group application process and eventually automate it all together through the use of APIs and electronic signature will eventually prevail.

3. Health Plan Technology Refresh

At the heart of many challenges lies a decades-old eligibility and enrollment solution at many insurance carriers.  Sometimes its exacerbated by the fact that after years of consolidation, you may have to deal with multiple platforms even if you’re working with a single carrier.  This begs the question, “How are quoting, enrollment and administration platforms differentiating themselves today?”

Sadly, the answer is that some of the leading players are focused on being experts at masking complexity through a combination of technology and service.  This is necessary but myopic.  Without a focus on updating health plan infrastructure, we will be forever hamstrung by decades-old technology that was first developed when I was in Elementary School.


Prediction #3:  Carriers are good at marketing and managing risk.  Technologists are good at building solutions.  The first established carrier to partner with a technologist to re-envision eligibility and enrollment will usher in the next age.  If no one picks up the pace, plans like Oscar and other green-field entrants to the market will successfully disrupt companies that have had a lock on the industry for almost a century.

Who’s leading the pack?

When evaluating who’s leading many groups look for slick new user experiences or limitless flexibility in the back-office functionality.  We feel that leaders solve for the present and agitate for change in the future by not simply pointing out the problems for others to solve but by leaning in to help solve the problems directly.  This month we’ve been updating our competitive intelligence content for the Q3 release on August 14th.  Stay tuned for our next Top Three Movers and Shakers list.

As always, we welcome your comments and feedback.