Why small business employees don't use their benefits — and how brokers can fix it
The problem in one number
According to LIMRA, nearly 1 in 3 employees say they don't fully understand their benefits package. For small businesses, where HR resources are thin and benefits communication is minimal, that number is likely higher.
The utilization gap is a real business problem
Employers spend an average of $15,000–$22,000 per employee per year on benefits, according to the Bureau of Labor Statistics. That figure represents roughly 30% of total compensation costs. Yet a substantial portion of that investment is wasted — not because the benefits are bad, but because employees don't understand what they have or how to use it.
For brokers, this creates both a problem and an opportunity. An employer whose employees don't engage with their benefits is an employer who questions the ROI of their benefits spend — and eventually questions the value of their broker relationship.
Why don't employees use their benefits?
1. The language is genuinely difficult
Insurance is written by lawyers, for lawyers. Deductible, coinsurance, formulary, prior authorization, in-network allowable — these terms are not intuitive. A 2023 UnitedHealthcare survey found that only 9% of consumers could correctly define 'coinsurance.' Benefits literacy is not a personal failing; the materials themselves are the problem.
2. Enrollment happens once a year, but questions happen daily
Employees make an election in November and forget about it until March, when they get a $600 bill they didn't expect. At that point, the SBC is gone, the HR contact is busy, and the insurer's phone wait time is 45 minutes. The result: disengagement and dissatisfaction.
3. Small businesses don't have dedicated HR
At a 20-person company, 'HR' is often someone who also does bookkeeping or operations. Benefits questions get deprioritized. Employees learn not to ask. Problems compound.
4. The tools don't meet employees where they are
Most carrier portals are clunky, hard to navigate, and not mobile-friendly. Employees who have grown up using Google and ChatGPT to get instant answers are not going to spend 30 minutes on a carrier website to figure out if their allergist is in-network.
What brokers can do about it
The brokers who win and retain SMB clients in the next five years will be the ones who solve the engagement problem, not just the enrollment problem. Practically, that means:
Providing plain-language benefits summaries for every plan offered — not the 90-page benefits booklet.
Giving employees a way to ask questions between enrollment periods without calling the broker or the carrier.
Tracking utilization data so you can demonstrate benefits engagement to your employer clients.
Using technology tools that automate the routine questions so you can focus on strategic advising.
This is exactly what Benefitly is built for
Benefitly gives brokers a white-labeled Q&A chatbot and plain-language plan navigator that employees can use year-round — not just at enrollment. The result: higher utilization, fewer calls to HR, and a broker relationship that demonstrably improves employee outcomes.
Frequently asked questions
How do I measure benefits utilization for my clients?
Most carriers provide utilization reports on request or through their broker portal. Key metrics: deductible attainment rates, preventive care utilization, prescription adherence, and EAP engagement. Benchmark against industry averages to show your clients where they stand.
Is benefits communication part of a broker's responsibility?
Legally, no. But competitively, the answer is increasingly yes. Employers evaluating brokers are asking: what do you do beyond placing the business? Benefits communication and employee education are differentiators that traditional brokers often don't provide.
