By Rob Capone, Senior Employee Benefits Consultant, JS Benefits Group
Pennsylvania employers continue to face pressure from rising health insurance costs. When a renewal comes in higher than expected, the conversation often turns immediately to higher deductibles, increased employee contributions, or reducing coverage.
Those are not the only options.
There are several strategies Pennsylvania employers can evaluate before accepting another large renewal increase. The right approach depends on the size of the company, claims experience, employee population, current plan design, and overall benefits strategy.
In our latest video, I walk through several of the strategies employers should consider before their next renewal.
Watch the video:
How Pennsylvania Employers Can Reduce Health Insurance Costs
Start by Taking Your Health Plan to Market
One of the simplest things an employer can do is make sure the current plan is actually being compared with other available options.
Too many employers simply receive their renewal, look at the increase, and accept it because they assume there are no better alternatives.
A competitive renewal review can involve comparing carriers, plan designs, funding arrangements, networks, employee contributions, and alternative strategies.
The goal isn’t simply to find the cheapest insurance plan.
The goal is to determine whether the employer is getting the right combination of cost, coverage, network access, risk protection, and employee value.
That distinction is important.
A plan that looks inexpensive on paper may not be the best fit for the workforce. Likewise, an employer may be paying more than necessary because the plan has never been strategically redesigned.
Consider Level-Funded Health Plans
For some small and mid-sized employers, a level-funded health plan can provide an alternative to traditional fully insured coverage.
A level-funded arrangement generally combines:
- Funding for expected claims
- Administrative expenses
- Stop-loss protection
The employer makes a predictable monthly payment while gaining greater visibility into the plan’s claims experience.
Depending on the arrangement and actual claims, there may also be an opportunity for the employer to receive unused claims funds.
That is one reason level funding has become an important part of the conversation for employers evaluating alternatives to fully insured health insurance.
JS Benefits Group provides more information about how these arrangements work on its Level-Funded Health Plans page.
However, level funding isn’t automatically right for every employer. Underwriting, claims history, employee demographics, plan design, and risk tolerance all need to be evaluated before making a change.
An HRA Can Be Part of the Strategy
Another option employers should understand is the Health Reimbursement Arrangement, or HRA.
An HRA is an employer-funded arrangement that can reimburse employees for eligible healthcare expenses under the applicable plan rules.
An HRA can sometimes be paired with a higher-deductible health plan to create a different balance between employer premium costs and employee out-of-pocket exposure.
The important point is that an HRA should not be viewed as an isolated product.
It is one component of a broader benefits strategy.
For employers considering this approach, our HRA and healthcare cost strategy article explains how an HRA can fit alongside traditional, level-funded, and self-funded health plans.
ICHRA May Be Another Option
Individual Coverage HRAs, or ICHRAs, provide another way employers can structure health benefits.
Instead of sponsoring a traditional group health plan for eligible employees, an employer can establish an arrangement that reimburses eligible employees for individual health insurance coverage and other qualifying expenses, subject to applicable rules.
For certain employers and workforce structures, this can provide a more defined approach to employer contributions.
It is important to evaluate the eligibility rules, employee classes, affordability requirements, and compliance considerations before implementing an ICHRA.
Don’t Ignore Pharmacy Costs
Medical insurance isn’t the only place employers should look for savings.
Pharmacy spending can represent a significant portion of an employer’s overall healthcare costs, particularly when specialty medications and high-cost drugs are involved.
That makes the pharmacy benefit manager — or PBM — an important part of the conversation.
Employers evaluating their health plan should ask questions such as:
- How is the PBM being compensated?
- How are rebates handled?
- Is pricing transparent?
- Are there spread-pricing arrangements?
- What is the employer actually paying for specialty medications?
- Are there opportunities to restructure the pharmacy benefit?
JS Benefits Group also works with employers on PBM management and pharmacy cost strategies as part of a broader healthcare cost-management approach.
Claims Management Goes Beyond Insurance
Reducing healthcare costs isn’t only about negotiating premiums.
Employers should also look at what is driving claims.
That can include:
- Chronic conditions
- Emergency room utilization
- Specialty medications
- Lack of preventive care
- Employee confusion about where to seek care
- Unnecessary healthcare utilization
- Poor navigation of the healthcare system
This is where employee advocacy and wellness programs can become valuable.
When employees have access to someone who can help them understand their benefits, find appropriate care, navigate claims, and address healthcare questions, the employer may be able to improve how the plan is used.
Wellness programs can also support preventive care and healthier behaviors when they are thoughtfully designed and effectively communicated.
Benchmark Your Current Benefits Before Making Changes
Before changing a health plan, employers should understand where they currently stand.
That means looking at:
- Employer premium costs
- Employee contributions
- Deductibles
- Out-of-pocket maximums
- Claims experience
- Pharmacy spending
- Network utilization
- Plan participation
- Employee demographics
- Renewal history
JS Benefits Group also offers an Employee Benefits Benchmark Calculator to help employers compare healthcare costs against available benchmark information.
Benchmarking doesn’t tell an employer exactly which plan to choose, but it can help identify whether the current strategy deserves a closer look.
Don’t Wait Until the Renewal Arrives
The best time to evaluate alternatives is before the renewal becomes urgent.
For many employers, beginning the process approximately 90 to 120 days before renewal provides more time to:
- Review the existing plan.
- Analyze claims and utilization.
- Evaluate alternative funding arrangements.
- Shop competing carriers.
- Compare plan designs.
- Review pharmacy costs.
- Model employee contributions.
- Communicate changes to employees.
- Complete open enrollment.
Waiting until the renewal is sitting on the desk can significantly reduce the amount of time available to evaluate alternatives.
The Goal Isn’t Simply to Spend Less
The objective of a benefits strategy should not be to find the lowest possible premium.
It should be to create a health plan that works for both the employer and employees.
That means balancing:
Cost + Coverage + Employee Experience + Risk + Long-Term Sustainability
For some Pennsylvania employers, that may mean remaining fully insured.
For others, it may mean moving to a level-funded or self-funded arrangement.
For another employer, an HRA, ICHRA, PBM strategy, advocacy program, or a combination of approaches may make more sense.
There is no single solution that works for every company.
The important thing is to evaluate the options before automatically accepting another renewal increase.
Pennsylvania Employers Should Have the Conversation Before Renewal
If your company’s health insurance renewal is increasing significantly, don’t assume the only answer is to shift more costs to employees.
Take the time to evaluate the entire strategy.
Look at the funding arrangement. Review the claims. Examine pharmacy costs. Benchmark your current plan. Compare carriers. Consider whether an HRA, ICHRA, level-funded plan, or another approach could make sense.
The right strategy starts with understanding the numbers.
Request a free employee benefits analysis from JS Benefits Group and find out what alternatives may be available for your organization.
Call JS Benefits Group: (877) 355-6070
JS Benefits Group serves employers throughout Pennsylvania, including Bucks County, Chester County, Montgomery County, Philadelphia, and surrounding communities, as well as employers throughout New Jersey, Delaware, Maryland, and New York.
About the Author
Rob Capone is a Senior Employee Benefits Consultant at JS Benefits Group, where he works with employers on group health insurance, benefits strategy, cost containment, plan design, and employee benefits solutions.
Rob helps business owners, CFOs, HR leaders, and management teams evaluate healthcare strategies designed to balance employee benefits with long-term cost management.
JS Benefits Group
54 Friends Lane, Suite 121
Newtown, PA 18940
(877) 355-6070
https://jsbenefitsgroup.com
This article is for general informational purposes only and does not constitute legal, tax, or insurance advice. Health plan options, eligibility, pricing, savings, and outcomes vary by employer. Employers should consult with qualified benefits and tax professionals regarding their specific circumstances.
