By Jennifer Schaefer, MBA, ChFC, CLU, RHU, REBC, SHRM-SCP
Founder & CEO, JS Benefits Group
When a health insurance renewal arrives, many employers immediately focus on one number:
How much is the premium increasing?
That is understandable. Health insurance is one of the largest expenses many businesses face, and a significant renewal increase can have a direct impact on the company’s budget and employees.
But there is a bigger question employers should be asking.
Is accepting and negotiating the renewal really the right strategy for the company?
In my experience working with employers on employee benefits strategy, one of the biggest mistakes a company can make is waiting until the renewal arrives before evaluating its health plan.
A renewal should not be the starting point of the conversation.
It should be one piece of a much larger analysis.
The #1 Health Insurance Renewal Mistake: Treating the Renewal as the Decision
A traditional renewal process often looks something like this:
- The insurance carrier sends the renewal.
- The employer sees the proposed increase.
- The broker negotiates with the carrier.
- The employer decides whether to accept the increase, change the plan, or increase employee contributions.
- The renewal is completed.
The problem is that this process can limit the conversation before it even begins.
Instead of asking, “How do we manage this renewal?”, employers should be asking:
“Is our current health insurance strategy still the right strategy for our company?”
Those are two very different questions.
A renewal discussion should include an evaluation of the current plan design, claims experience, employee demographics, contribution strategy, healthcare spending, available carrier options, and alternative funding arrangements.
Don’t Let the Renewal Percentage Become the Entire Conversation
A renewal percentage is important, but it does not tell an employer everything it needs to know.
For example, an employer could receive what appears to be a reasonable renewal increase but still have opportunities to improve the overall healthcare strategy.
The opposite can also be true.
An employer might receive a large renewal increase, but simply moving to another carrier may not address the underlying issue.
The real objective should be understanding what is driving the cost and what alternatives are available.
That may involve looking at:
- Current claims experience
- Plan design
- Deductibles and out-of-pocket maximums
- Employer and employee contributions
- Network design
- Prescription drug costs
- Employee utilization
- Funding structure
- Alternative carrier options
- Level-funded health plans
- Self-funded health plans
- Healthcare cost-containment strategies
- Employee affordability and retention
The right strategy depends on the employer.
There is no single health insurance solution that is appropriate for every company.
The Renewal Should Be an Annual Strategy Review
I believe employers should think about their health plan as a financial and workforce strategy—not simply an insurance policy that gets renewed once a year.
Healthcare benefits affect much more than the company’s insurance budget.
They can affect:
- Employee recruitment
- Employee retention
- Employee satisfaction
- Compensation strategy
- Employer cash flow
- Healthcare affordability
- HR workload
- Financial forecasting
- Overall workforce strategy
That is why a health insurance renewal deserves more than a quick review of the carrier’s proposed rate.
The question should be whether the company’s entire benefits strategy is still aligned with its business.
Should Your Company Consider Level-Funded or Self-Funded Health Insurance?
For some employers, the renewal process may reveal that it is worth evaluating an alternative funding arrangement.
Depending on the company’s size, claims experience, employee population, financial position, and tolerance for risk, alternatives can include:
Fully insured health insurance
The carrier generally assumes the claims risk and the employer pays a predetermined premium.
Level-funded health insurance
A level-funded arrangement can combine predictable monthly payments with elements of self-funding and may provide greater access to claims information, depending on the arrangement.
Self-funded health insurance
The employer assumes greater responsibility for claims costs, typically with stop-loss insurance and other risk-management protections.
The important point is not that every employer should move away from fully insured coverage.
The important point is that employers should understand why they are using their current funding model and whether it remains appropriate.
You can learn more about level-funded health plans here:
https://jsbenefitsgroup.com/level-funded-health-plans/
Start the Renewal Process Earlier
One of the most effective ways to improve the renewal process is to start before the renewal arrives.
Waiting until a carrier sends the renewal can leave employers with limited time to evaluate alternatives.
Starting earlier gives an employer more opportunity to:
- Review claims information
- Analyze current plan performance
- Benchmark the existing plan
- Evaluate contribution strategies
- Compare alternative plan designs
- Explore different funding arrangements
- Review pharmacy costs
- Consider employee affordability
- Model potential changes
- Prepare employees for any changes
The earlier the analysis begins, the more options an employer may have.
Your Broker Should Be Doing More Than Delivering the Renewal
A health insurance broker or benefits advisor should be helping an employer understand the entire decision—not simply presenting the carrier’s renewal proposal.
That means asking questions such as:
What is driving our healthcare costs?
How does our plan compare with the market?
Are there alternative plan designs that could improve our overall costs?
Should we evaluate level funding or self-funding?
Are our employee contributions sustainable?
Are we getting enough value from our pharmacy benefit strategy?
What does our claims data tell us?
What will this strategy look like three years from now?
Those questions move the conversation from renewing insurance to managing healthcare.
Don’t Automatically Shift More Costs to Employees
When healthcare costs increase, one of the easiest responses is to shift more of the expense to employees.
That can mean:
- Higher deductibles
- Higher copays
- Higher employee contributions
- Higher out-of-pocket exposure
- Reduced benefits
Sometimes changes to employee contributions or plan design may be appropriate.
But they should be considered as part of an overall strategy—not automatically used as the first response to a renewal increase.
Employers need to balance cost management with the employee experience.
A benefits strategy that saves money but makes the program unaffordable or significantly less competitive may create other business problems.
The Better Question to Ask at Renewal
Instead of asking:
“Can you negotiate our renewal?”
I encourage employers to ask:
“Have we evaluated every reasonable option before deciding what to do with our health plan?”
That question changes the entire conversation.
It opens the door to benchmarking, plan design analysis, alternative carriers, level funding, self-funding, claims analysis, pharmacy strategies, and other healthcare cost-management opportunities.
The goal isn’t simply to get through another renewal.
The goal is to make a better healthcare decision for the business and its employees.
A Health Insurance Renewal Is an Opportunity
Every renewal gives an employer an opportunity to step back and evaluate the bigger picture.
Is the plan still competitive?
Is the funding strategy still appropriate?
Are employees getting good value?
Is the employer paying more than necessary?
Are there opportunities to improve the plan without simply cutting benefits?
Are there alternative strategies that should be considered?
These are the questions that can lead to a more strategic employee benefits program.
At JS Benefits Group, we work with employers to evaluate employee benefits, group health insurance, plan design, healthcare costs, funding strategies, and long-term benefits strategy.
Learn more about our employee benefits solutions:
https://jsbenefitsgroup.com/employee-benefits-solutions/
If your company is approaching a health insurance renewal, don’t wait for the renewal notice to start the conversation.
Start earlier. Ask more questions. Understand the numbers. Evaluate your options.
Your health insurance renewal should be more than a percentage increase.
It should be a strategic business decision.
Watch the Video
Watch Jennifer Schaefer explain The #1 Health Insurance Renewal Mistake:
About the Author
Jennifer Schaefer, MBA, ChFC, CLU, RHU, REBC, SHRM-SCP
Founder & CEO, JS Benefits Group
Jennifer Schaefer is the Founder and CEO of JS Benefits Group, an employee benefits consulting firm headquartered in Newtown, Pennsylvania. She has more than 30 years of experience helping employers evaluate employee benefits, group health insurance, healthcare costs, plan design, funding strategies, and workforce benefits.
Jennifer works with employers on strategic benefits planning, healthcare cost management, level-funded and self-funded health plans, benefits benchmarking, compliance, employee benefits strategy, and workforce retention.
She is a Forbes Business Council Contributor and Co-Host of Executive Leaders Radio.
JS Benefits Group
54 Friends Lane, Suite 121
Newtown, PA 18940
Phone: 877-355-6070
Email: info@jsbenefitsgroup.com
https://jsbenefitsgroup.com/jennifer-schaefer-founder/
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