Renewal season for HR benefits is a critical time for businesses across both the private and public sectors. It’s more than just an administrative process—it’s a strategic opportunity to align employee benefits with your organization’s financial goals while meeting the needs of your workforce.
This guide offers practical tips and strategies to help you maximize your HR benefit renewals, ensuring that you secure a plan that delivers value, cost savings, and employee satisfaction.
Medical Insurance: The Big Cost Driver
Medical insurance often represents the largest expense in a company’s benefits package and is a top concern for employees. It also presents a key opportunity for cost savings. Here’s what you need to know:
The landscape for company-sponsored medical insurance is evolving rapidly. Since the Affordable Care Act (ACA) was enacted in 2016, the government has been centralizing payment for benefits and pooling risk in larger groups through the public insurance marketplace. This shift is changing how insurance companies operate, leading some—like Humana—to exit the employer-sponsored insurance market entirely.
Fewer insurance carriers mean small and medium-sized businesses often face limited options, making it harder to negotiate favorable pricing—especially after a high-claims year. Insurance companies are sensitive to risk, particularly with smaller groups where one or two employees can account for 80-90% of claims costs. One large claim can significantly impact pricing, with companies sometimes facing premium increases of 50% or more.
Cost-Containment Strategies
Here’s what you can do to better manage these rising costs:
- Get multiple quotes annually. Even if your broker is hesitant, shopping around every year is essential. Explore options not just with insurance companies (carriers) but also with plan designs. Never settle for the first quote you receive—it’s often not the best.
- Expect your broker to negotiate. Your broker should be leveraging claims data and membership information to negotiate lower renewal costs, especially if high-claims conditions aren’t likely to continue into the next year.
- Review your plan designs and claims utilization. How are your employees using your current plans? By adjusting plan designs, you might be able to reallocate premium dollars, offering a better package without increasing costs.
- Consider joining association-sponsored plans. Local chambers of commerce or trade associations may offer negotiated pricing for their members. Many are easy to join with low dues, though they may have size limits—for example, some Kentucky Chamber plans are only available to companies with fewer than 50 employees.
- Explore self-funding options. Though it may sound intimidating, partially or fully self-funding your plan can cap your risk and allow your company to benefit if claims are lower than expected. This approach can also give you greater control over administrative costs, Rx expenses, and claims management.
- Join a captive. These plans enable you to pool risk with other companies, reducing costs and eliminating the insurance company’s profit margin. Captives work well for healthier groups experiencing large price hikes or low plan utilization but are less effective for high-claims groups.
- Leverage ICHRAs to direct employees to the marketplace. With legal policy changes, companies can now set up Individual Coverage Health Reimbursement Arrangements (ICHRAs) to move employees into the public insurance marketplace, pooling their risk with millions of others to lower overall rates.
Communication Is Key
Benefits can be confusing for employees, and it’s often challenging to get them to fully understand the value of what you’re offering. Clear and simple communication is essential, especially during open enrollment. Show employees how changes will impact them individually, and make sure they have a point of contact to ask questions throughout the year. Often, employers don’t get enough credit for the benefits they provide, so consistent communication can make a big difference.
Big Savings with the Right Approach
When used effectively, these strategies can result in 20%-30% cost savings without sacrificing the overall quality of benefits. If this feels overwhelming, partnering with a trusted benefits advisor can help guide you through the complexities of the renewal process, identify cost-saving opportunities, and ensure smooth communication with your broker and employees. A good advisor can truly be a game-changer!
Take control of your renewals and start exploring the opportunities today!
This article was written in collaboration with On Plane Consulting.
