For many mid-sized employers, the annual benefits renewal process has followed the same pattern for years: receive the fully insured renewal, ask the broker to shop the market, compare a handful of quotes, and decide which carrier offers the best combination of cost and benefits.
But when healthcare costs continue to rise, simply looking for another fully insured quote may not be enough.
Employers should be asking a bigger question:
Is the way we finance our health plan still the right fit for our organization?
A competitive fully insured quote can certainly be part of the answer. But a thoughtful renewal strategy should also explore other funding options, understand what is actually driving claims, and determine whether there are opportunities to gain greater control over long-term healthcare spending.
Start With What Is Driving Your Costs
Before deciding how to fund the plan, employers need to understand what is happening underneath the renewal.
What is driving the increase? Are there several large claims? Is pharmacy spending increasing? Are certain conditions consistently driving utilization? Are employees using the most appropriate sites of care?
A renewal percentage alone does not tell the full story.
The more an employer understands its healthcare utilization and cost drivers, the better positioned it is to evaluate whether the current plan structure is working—or whether a different strategy could provide more control.
Look Beyond Fully Insured
Fully insured plans remain a good solution for many organizations. But they are not the only option available to mid-market employers.
Depending on the size, risk tolerance, claims experience and goals of the organization, employers may want to evaluate strategies such as:
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Level funding, which can provide some of the advantages of self-funding while creating more predictable monthly costs.
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Self-funding, which gives employers greater visibility into claims and more flexibility in how the health plan is designed and managed.
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Group health captives, which allow employers to participate in a larger risk pool while retaining greater control over their healthcare strategy.
Exploring these alternatives does not mean an employer has to leave its current carrier or move away from fully insured coverage. In fact, evaluating other funding options can strengthen an employer’s position at renewal.
When a carrier knows an employer has thoroughly evaluated level-funded, self-funded, captive and other viable alternatives, the renewal conversation can change. Instead of simply asking the incumbent carrier for a better rate, the employer and its advisor have credible alternatives to bring to the table. That can create additional negotiating leverage and encourage carriers to sharpen pricing, reconsider terms or provide other concessions to retain the business.
Sometimes the value of exploring an alternative isn’t ultimately choosing it—it’s understanding your options well enough to negotiate from a position of strength.
The goal is not to move every employer away from fully insured coverage. The goal is to make sure the employer has evaluated its options before making another year-long commitment.
Compare More Than Premium
One of the biggest mistakes an employer can make is evaluating funding strategies based solely on the first-year price.
A lower premium does not automatically mean a better long-term strategy.
Employers should also consider factors such as claims transparency, potential risk, stop-loss protection, cash flow, pharmacy arrangements, plan flexibility, administrative responsibilities and the organization’s ability to benefit when claims perform better than expected.
Some alternatives may require employers to take on additional responsibility or risk. That is why these decisions should be modeled carefully—not made simply because one option appears less expensive on a spreadsheet.
Use Renewal as a Strategic Planning Opportunity
The strongest benefits programs are not built during the final few weeks before renewal.
Employers should begin evaluating their strategy well in advance, giving their benefits advisor enough time to review claims, model different funding approaches, explore the market and identify opportunities to manage costs.
Starting earlier also creates more leverage. If the incumbent carrier knows there is not enough time for an employer to realistically pursue another option, there may be little incentive to make meaningful changes to the renewal. A well-developed alternative gives employers something much more valuable than another quote: options.
That changes the renewal conversation from:
“Which carrier gave us the best quote?”
to:
“Which strategy gives us the best opportunity to manage our benefits program over the next several years?”
That is a much more valuable question.
There Is No One-Size-Fits-All Answer
Moving to self-funding, level funding or a captive is not automatically the right decision. For some employers, remaining fully insured may continue to make the most sense.
But mid-market employers should understand the alternatives available to them.
At Dillingham Benefits, we believe employers deserve more than an annual spreadsheet of carrier quotes. A strong benefits strategy should help organizations understand their healthcare spending, evaluate different funding approaches, create leverage in carrier negotiations and make informed decisions based on both their current needs and long-term goals.
Before your next renewal, don’t just ask what another carrier will charge. Ask what other options are available—and how those options could help you build a stronger benefits strategy.
