Health Insurance Renewal Season, Part 1: The Advantages of Taking Action

BY RYAN SPENCER

When it comes to health insurance premium increases, many businesses have been bullied into complacency. Instead of fighting back, they’ve accepted the status quo rate hikes of between 8 and 12 percent each year. As a result, many businesses do not take action to lower their costs in large part because they believe they have few options for fighting rate increases that do not lead to dramatically slashing benefits for employees. What they don’t realize: Putting up a little resistance against the insurer can prevent a bad renewal and all the excessive extra costs that come with it. 

Successfully navigating the renewal process requires a two-part strategy. You need to: 

1. Collect data on how your plan is used by employees so you can make high-value decisions. 
2. Understand what problems exist within the current plan. 

With these two elements in place, you’ll have an ecosystem where you, the employer, can make better decisions on behalf of your employees. In fact, one of our clients has proven these steps can create enormous change for your business.

Case Study: Renewing For a -1% Increase

One of our clients is an Indianapolis-based employer with 100 people on their plan. By carefully approaching each renewal opportunity in each of the last five years, they’ve renewed each year with a -1% rate increase—an enormous markdown from the typical 8%-12% most companies suffer. Thanks to their dedication, they’ve saved approximately $1.8 million over the last five years. 

Their Annual Strategy

Each year before renewal, this company analyzed their data, identified employee health risks, and isolated problems within their plan. From there, they built strategies to correct for these issues. 

By correcting for these issues each year, and consistently educating employees on plan benefits, they reduced risk to the point that their year costs decreased while their industry competitors suffered cost hikes. 

The Pay Off

The employees and employers have enjoyed two major benefits by taking an active role in their annual renewals: 

1. They’ve actually improved the quality of benefits the employees receive. In fact, employees actually pay less when they seek out highly-ranked medical professionals within their region. The reason: The best doctors and medical facilities generate cost savings down the road by reducing recovery time and improving overall health. This is especially important in a location like Indiana, where 80% of physicians are employed by the networks or facilities they work inside, meaning they’ll only refer you to specialists within that same network or facility. This can lead to employees entrusting their health to professionals with lower skill sets. As an added bonus, employees also have better access to pharmaceutical options and medications. 
2. The employer has passed the savings along to the employees. With $1.8 million left over in the last five years, the employer has made significant investments back into its team. They have increased employee wages and ramped up 401(k) contributions now that less money is being stolen by the health plan. By reinvesting back into their population, the company stands out among its competitors with higher wages and better benefits packages. The company now enjoys an extra edge that helps it stand out during recruiting. 

One employee saw the biggest financial benefit yet: Before switching to our plan five years ago, this individual spent a third of their monthly income on medication. No more. The current plan can source all the necessary medications at no cost to the employee. Essentially a 33% raise, this has been more powerful than any typical wage increase or 401(k) contribution. 

Navigating Forward

There is no silver bullet when it comes to renewals. To succeed, a company needs to commit to taking action. Without a full evaluation of the current plan and risks, there are few opportunities to make improvements. But once you take that first step, the results can be dramatic. Failing to take action can be detrimental to both your company and your employees. Don’t miss the second part of this series in our next blog, when we discuss the pitfalls to inaction before your renewal. In the meantime, talk to your team internally about the changes you should push for at renewal or bring in an outside consultant to help start the conversation.