Most mid-market US employers have never had a real conversation about how their benefit plan is funded and that knowledge gap is becoming one of the most significant opportunities in group benefits advising today, according to James Jacobi, vice president of employee benefits at The Hilb Group, headquartered in Richmond, Virginia.
"A lot of employers that I've seen personally - even when I talk about this with my colleagues - if they're in a fully insured plan or even a level-funded plan, they have never received or really understood alternative funding at all," Jacobi said. "And it's scary to them. But the reality is, the thing that you're in, is hurting you."
Jacobi focuses his practice on employers in the 50-to-1,000-life range, a segment he describes as uniquely exposed to the current cost environment. Large enough to generate meaningful claims data, but without the internal benefits expertise of a Fortune 500 HR department, these employers are disproportionately reliant on their broker to interpret what is happening to their plan and why.
Jacobi said that many of these clients are still sitting inside fully insured structures they have never questioned and renewals that once came in at 10 to 15 percent are now arriving at 25, 35, and in some cases well over 50 percent. He described the conversations he is having with HR leaders and C-suite executives at these companies as a consistent pattern of shock.
"The reality that's coming to employers right now is: if they don't start thinking differently about how they buy and spend money on their benefit plans, they're faced with different choices than they had in previous years," he said. "Maybe we can only pay for 70 or 50 percent of their benefits now or maybe less. And that's also not a sustainable plan."
Employers who are genuinely frightened by a renewal number are, for the first time, ready to listen to a conversation they would have deflected two or three years ago.
The reason most mid-market employers have never explored self-funding, stop-loss carve-outs, or pharmacy separation is often that no one has walked them through it at the right time.
Jacobi is precise about the timing problem. Brokers who introduce alternative funding structures inside the 60-to-90-day renewal window - when the pressure is highest and the decision timeline is shortest - are almost guaranteed to lose the conversation. The concepts are too new, the numbers too unfamiliar, and the perceived risk too high for an employer to commit under that kind of time pressure.
"If you spring that on people at the renewal window time, in a lot of cases it's too much information," he said. "That conversation has to happen six to nine months out."
The advisory model Jacobi describes is one where brokers are presenting hypothetical funding scenarios to clients well in advance - not as a pitch, but as preparation.
"What we can do is talk about strategies: when the stuff hits the fan and it's not good, rather than freak out, we've already rehearsed this," he said. "We've talked about here's where we can look, here's what we can do, so that you're prepared and you feel confident about what you're going to decide."
That preparation changes the dynamic at renewal entirely. An employer who has spent months understanding what a move to a self-funded structure with a stop-loss carrier might look like - including confirmation that their existing provider network can be preserved, if required, through a network rental arrangement - is in a fundamentally different position than one hearing those options for the first time at 60 days out.
For brokers looking to open the alternative funding conversation with fully insured mid-market clients - who typically receive little or no usable claims data from their carrier - Jacobi pointed to artificial intelligence (AI) gradient data tools as a practical entry point.
The same underlying technology is used by carriers to price group risk at underwriting. Putting it in the hands of brokers effectively levels the information asymmetry that has historically favored carriers in renewal negotiations.
"If you don't know your own data really, really well - guess what? The carrier does. And the pharmacy company does. And they're a business," Jacobi said. "Do they have any interest in giving you maximum savings? Absolutely not."
Armed with that data, brokers can do something far more valuable than presenting renewal alternatives: they can show an employer specifically what is driving their cost, identify which elements of the plan are generating the most risk, and model what alternative structures would do to both their premium exposure and their stop-loss ceiling.
For mid-market employers who have never seen their plan through that lens, the conversation is often a turning point.
"Once you experience someone that's providing year-long value and advice and trend data and guidance on different funding models," Jacobi said, "you'll never look back."
The employers most receptive to this conversation right now are those staring at renewals they cannot absorb - which, in the current market, is a significant share of the mid-market. Brokers who can present a credible alternative funding analysis before that renewal arrives are positioned not just to retain the relationship, but to deepen it.
"There is a ton of new solutions every year coming to the market on the employer side for how to help your benefit plan survive," Jacobi said. "There's models and companies that we're putting in front of clients that we never would have thought of or didn't know about a year or two ago - better transparency around pricing, better budgeting and fixed costs up front so you know what your spend is going to be before it happens."
The message for group benefits advisors working the mid-market is that the employers who most need this conversation are already in their book. The window to have it - before renewal panic sets in - is now.
"We gotta change how we're playing the game," Jacobi said. "Or we're not going to win."
