If your business renews its employer-sponsored health insurance plan on a calendar-year basis, discussions about next year’s coverage are likely underway. Rising healthcare costs make these decisions increasingly important.
According to preliminary survey results from Marsh’s Mercer business, employer health benefit costs per employee are projected to increase an average of 8.2% in 2027. Businesses should use the renewal process to evaluate employee needs, understand cost drivers, and strike an appropriate balance between cost and coverage.
Start With People
Before changing plan benefits, review enrollment and employee feedback. Are workers using the plans you offer? Do they understand their choices? You may be looking for ways to cut costs, but a lower-premium plan may be a poor fit if its deductible, prescription coverage, or provider network makes care less affordable for employees.
Ask your benefits consultant for spending pattern and plan use data (that omits employees’ medical conditions). These reports can help you spot opportunities to improve plan design and communication. For example, employees may not use lower-cost care options because they aren’t aware of them. Be sure you compare the cost of plans you’re considering to what employees will pay, including premiums and likely out-of-pocket expenses.
Putting Numbers In Context
Your consultant or insurance broker can explain increases proposed by insurers and compare competing options on the same basis for the following:
- Provider networks
- Deductibles
- Prescription formularies
- Administrative fees
- Any changes in covered services
A lower quote may come with trade-offs that matter to your workforce. For instance, high-deductible health plans paired with Health Savings Accounts can appeal to some workers, but you shouldn’t assume everyone will embrace that option.
Give pharmacy coverage particular attention. Prescription drug benefits are among the fastest-growing expense categories. Ask what drives your costs, how rebates and fees are handled, and whether other contract arrangements offer better value.
If your health plan is self-funded, an independent review of claims payments and pharmacy contract terms may uncover errors or charges that warrant your follow-up. A benefits advisor can help determine whether potential savings justify the review’s cost. For any plan, request a clear explanation of proposed wellness or care-navigation programs, including how employees would use them and how you’d measure results.
Financial Impact
The cheapest plan isn’t necessarily the best choice for your business and its workers. Changes that raise employees’ costs may affect their ability to get care and how they view your benefits package. That, in turn, can affect hiring and retention.
Before signing renewal papers, model several options using your expected enrollment, employer contributions, and cash flow. Also, contact us. We can help you compare the financial impact of renewal proposals, test different cost-sharing approaches, and insert the plan you choose into next year’s budget.
KPM also offers employee benefit plans – if you’re in need of a benefit plan, or yours isn’t performing well, we can help.
