This year, premiums saw the largest increase in more than a decade, arriving after several years of an already elevated trend. What once felt painfully tolerable suddenly became unbearable for clients, accelerating knock-on effects that make the brokers’ job both more difficult than ever, but also more vital.
To cope with record-high costs, the best brokers are actively shopping for solutions to the best of their abilities during a constrained Q4 window — shifting toward level-funded plans, direct reimbursement models, exploring ICHRA, and other alternative coverage strategies that fundamentally change how brokers service and advise clients, and are compensated.
As these factors reach a critical mass amidst a historical technological paradigm shift, brokers must fundamentally redesign their operating models to sustain their vital role in supporting clients and the broader value chain.
Shifting employer coverage creates new broker challenges
To understand why brokers are under so much pressure, it helps to look at how employer health coverage itself is changing.
For decades, most small and mid-sized employers relied on fully insured health plans. In these arrangements, insurers pool risk across many employers and set community-rated premiums that increased at a measured rate from year to year. Renewals were simple, and groups changed plans infrequently.
However, over the last decade, a self-reinforcing cycle has reshaped the small and mid-sized employer market. Healthier employers seeking premium relief migrated to level-funded plans. As those groups exited the fully insured pool, the remaining population skewed higher risk, pushing fully insured premiums up and triggering successive waves of plan shopping. Employers seeking novel solutions have increasingly turned to defined contribution or direct reimbursement strategies — ICHRAs, cash-pay drug programs, and direct-to-consumer offerings — which creates budgetary predictability and reduces exposure to employee out-of-pocket costs but adds meaningful complexity around administration, compliance, and broker compensation models.
After consecutive decades of elevated health cost growth, 60% of employers today report shopping carriers or pharmacy benefit managers and planning structural changes to their benefits. Almost half are planning or considering implementing alternative plan designs. This radically increases the work it takes to renew a group and conduct scaled analysis on the best product for a broker’s entire book of business, and it’s applying to more and more groups every year.
At the same time, clients navigating these new plan structures need more hands-on guidance than ever. Asking brokers to interpret tradeoffs, evaluate vendors, and manage compliance questions goes well beyond traditional renewal support. The advisory workload is expanding faster than most independent firms can absorb it.
Medical and technological innovation are reshaping the cost curve
Compounding the challenge is the pace of pharmaceutical innovation and AI billing applications, both of which are driving underlying healthcare costs higher in ways that are increasingly difficult for employers to anticipate or contain.
Prescription drug spending has become one of the most visible sources of cost growth. GLP-1 medications are currently the most frequently mentioned example of this concept, but they only represent part of a broader trend in pharmaceutical development. Biologic drugs and emerging gene therapies are producing breakthroughs that were unimaginable a generation ago. Some treatments can cure conditions that previously required lifelong care, but they can also carry price tags reaching millions of dollars. Employers face consequential decisions around how broadly to cover these therapies and how to manage the financial risk associated with them. Direct-to-consumer pharmaceutical offerings, cash-pay programs, and personalized reimbursement models are becoming more common, adding another layer of complexity to benefit design that is moving further and further down market.
Meanwhile AI billing tools are adding pressure from a different direction. A growing number of health systems are deploying AI-enabled coding tools that optimize how care is documented and billed, and the cost impact is substantial. A recent Blue Cross Blue Shield Association study found that member costs rose 9% between 2023 and 2024, with aggressive AI coding accounting for 20% of that increase. Researchers also estimate that AI-driven coding could be responsible for roughly $663 million in excess inpatient spending and at least $1.67 billion in outpatient exposure. These figures represent a meaningful share of a trend that shows no sign of slowing.
For brokers, both dynamics converge on the same problem. Clients expect guidance on coverage decisions that are growing more technically complex while the underlying cost environment shifts in ways that make costs meaningfully higher and projections harder to trust. Staying current across therapeutics, pharmacy, billing practices, and benefit solutions to address them is now a baseline expectation for brokers. The time it demands competes directly with the capacity to serve clients and grow.
Building the capacity to advise
Independent firms serving the small group market face a widening gap. The advisory work is growing more sophisticated and the book of business more complex, while the teams, hours, and business models underneath them have stayed the same. Meeting this moment requires brokers to consider how they can automate the administrative burdens that limit the time their people can spend with clients. And it will demand that they create the margin they need to evolve their services so they can be paid differently for the valuable service they provide.
While many industries worry about AI eliminating jobs, in the brokerage business it’s incredibly difficult to hire enough qualified producers and account managers to shoulder this growing burden. AI will be a critical tool to ensure today’s teams can rise to meet the challenge of serving employer clients, and do so quickly and profitably. Quoting automation, better data visibility, and AI-driven workflows can streamline compliance and client service tasks that currently require hours of manual effort, freeing up brokers and account managers for higher-level tasks.
But, tools alone are not enough. Sustained change will require operational support from partners who understand how brokerage businesses actually function. Today’s most important work is in applying AI to design the workflow transformation that will alleviate today’s pressures.
In a market where healthcare costs continue to climb and benefit structures grow more complicated, brokers remain one of the few stakeholders positioned to guide employers through the tradeoffs.
The challenge is making sure they have the capacity, tools, and compensation models to do that work.
Photo: champc, Getty Images
Will Johnson is the co-founder and CEO of Gyde, an AI-native insurance brokerage partnering through acquisition with leading employee benefits and medicare agencies. He previously spent a decade at Oscar Health, where he built national broker networks and led growth and platform teams serving millions of members. During that time, he worked closely with agencies navigating rapid growth, complex carrier relationships, and increasing administrative burden.
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