The small business benefits market operates on information asymmetry. Brokers know far more than their clients. Carriers know far more than both. And employers make expensive decisions based on limited visibility into alternatives, pricing dynamics, and their own utilization patterns.
Lumity has built a platform that eliminates much of this asymmetry. The results expose uncomfortable realities about how benefits markets actually function and why businesses overpay systematically for coverage.
Start with the most basic fact: small businesses typically pay 18 to 35 percent more for equivalent coverage than necessary. This premium is not because small businesses are expensive to insure. It exists because information gaps enable carriers and brokers to extract premium beyond competitive pricing.
How does this happen? The annual shopping cycle creates natural opacity. Most businesses shop benefits once yearly during compressed windows. Brokers present limited options. Employers lack time for comprehensive evaluation. And decisions get made under pressure without complete market visibility.
This process benefits everyone except employers. Carriers maximize premium without triggering the kind of aggressive shopping that truly competitive markets require. Brokers maintain relationships and avoid the work of comprehensive market analysis. And employers accept outcomes because they lack information to recognize overpayment.
Lumity breaks this pattern by providing year-round market intelligence and comprehensive carrier coverage. When businesses can see all available options with complete pricing transparency, the 18 to 35 percent premium disappears. Competitive pressure forces carrier pricing to levels justified by actual risk rather than information advantage.
Another uncomfortable reality: carrier rate increases often bear little relationship to claims experience. Businesses assume that high claims trigger high renewals while low claims earn favorable pricing. Reality is more complex and less fair.
Carriers adjust rates based on book profitability, competitive positioning, and strategic priorities that have nothing to do with individual employer experience. Your claims might be low, but if the carrier is unprofitable in your segment or geography, you face large increases regardless. Your claims might be high, but if the carrier wants growth in your market, they may offer competitive rates to maintain market share.
Traditional brokers cannot or will not explain these dynamics because doing so reveals their limited influence over outcomes. They present renewal increases as inevitable and tied to your experience because this narrative maintains their value proposition. Comprehensive market data exposes that carrier pricing is strategic rather than strictly actuarial.
Lumity gives employers visibility into these patterns through comparative analytics. When you can see how different carriers price similar risks, the strategic nature of rating becomes obvious. This knowledge enables smarter shopping and better negotiation because you understand what drives carrier behavior.
The platform also exposes network adequacy problems that brokers rarely highlight. Many benefit plans include provider networks that look comprehensive on paper but prove limited in practice. Geographic coverage appears broad until you map actual employee locations and discover significant gaps. Specialist access seems adequate until you analyze utilization and find wait times or travel distances that make theoretical access practically useless.
Traditional brokers lack analytical tools to perform this kind of evaluation. They rely on carrier network summaries that overstate actual adequacy. Lumity maps employee locations against provider networks and analyzes historical utilization to assess real accessibility rather than theoretical coverage.
This matters because network adequacy directly impacts both costs and employee satisfaction. Inadequate networks push employees toward out-of-network care that costs more and satisfies less. Comprehensive analysis during carrier selection prevents these problems rather than discovering them after implementation when correction is expensive.
Claims administration quality represents another area where information asymmetry harms employers. Carriers vary dramatically in how efficiently they process claims, how accurately they adjudicate coverage, and how responsively they handle disputes. These differences impact employee experience and employer administrative burden substantially.
But traditional benefits shopping focuses almost exclusively on premium and coverage design while ignoring administration quality. Brokers lack data to evaluate administrative performance across carriers. And employers discover administration problems only after selection when changing is difficult and expensive.
Lumity incorporates administrative quality metrics into carrier evaluation. The platform tracks denial rates, processing times, appeal outcomes, and satisfaction scores across carriers. This enables selection based on comprehensive value rather than just premium cost.
The self-funding versus fully insured decision represents perhaps the greatest area of opacity in small business benefits. Most businesses use fully insured arrangements where carriers assume all claims risk in exchange for fixed premiums. Self-funding transfers claims risk to employers in exchange for lower fixed costs and greater control.
For many businesses, self-funding offers superior economics. But traditional brokers steer toward fully insured arrangements because they are simpler to administer and generate more reliable commissions. The analysis required to evaluate self-funding properly is complex. And many brokers lack expertise or motivation to do it well.
Lumity provides sophisticated self-funding analysis that models costs under different risk scenarios. The platform shows break-even points, evaluates stop-loss coverage options, and forecasts likely outcomes based on claims history and demographic analysis. This enables genuinely informed decisions rather than default acceptance of fully insured arrangements.
What connects all these examples is information advantage that market incumbents prefer to maintain. Transparency threatens profitable opacity. When employers gain comprehensive market visibility and analytical capabilities, they make better decisions that reduce vendor pricing power.
The broader pattern Mike Ehrle has observed across his work at both Lumity and finparency is consistent: information asymmetry enables systematic value extraction from small businesses. Whether in benefits, investment access, or operational management, businesses lacking comprehensive data and analytical tools make suboptimal decisions that compound over time.
Technology platforms that restore information symmetry do not just reduce costs. They change market dynamics in ways that benefit employers systematically. The value is not one-time savings from better shopping. The value is permanent improvement in decision-making capability that enables optimization across all relevant dimensions.
For the millions of small businesses managing benefits through traditional broker relationships with limited data access, the opportunity cost is substantial and ongoing. Every year of continuing these arrangements is a year of overpayment and suboptimal outcomes that technology platforms could prevent. The businesses that recognize this and take action create immediate value and position themselves for sustained advantage.
Disclaimer: This article is for informational purposes only and does not constitute benefits, business, or financial advice. Benefits management decisions involve complex considerations specific to individual business circumstances. Always consult with qualified professionals before making significant benefits program changes.
