For many businesses, employee health insurance has traditionally been treated as a predictable annual expense. Each year, an employer receives a renewal, reviews the proposed increase, makes adjustments where necessary, and moves forward.
That approach is becoming increasingly difficult. Employers are looking for employee benefits consulting and healthcare cost management strategies that go beyond simply negotiating the next renewal. Healthcare costs continue to place pressure on company budgets, while employees have become more attentive to the quality, affordability, and accessibility of their benefits.
At the same time, businesses are competing for experienced employees who increasingly view benefits as an important part of the overall employment package. Healthcare benefits are therefore becoming less of an administrative issue and more of a business strategy.
Healthcare Costs Require More Strategic Planning
One of the biggest mistakes an employer can make is waiting until renewal season to begin evaluating its health plan.
By that point, there may be limited time to understand what is actually driving the organization’s healthcare spending. A renewal percentage tells an employer that costs are increasing, but it does not necessarily explain why.
Employers should look beyond the renewal number and examine the factors behind their healthcare expenses.
That can include:
- Claims utilization
- Prescription drug spending
- High-cost specialty medications
- Provider networks
- Employee and dependent demographics
- Plan design
- Employer contribution strategies
- Employee participation
- Administrative costs
- Stop-loss coverage for self-funded plans
Understanding these factors can give an employer more information when evaluating its options.
Benefits Are Also Part of the Employee Experience
Healthcare benefits can influence how employees perceive their overall compensation package.
An employee may receive a competitive salary but still experience frustration if their health plan has high deductibles, limited provider access, or prescription costs that are difficult to manage.
Employers therefore need to consider both sides of the equation: the company’s cost and the employee’s experience.
A benefits strategy should answer several basic questions:
Is the plan affordable for employees?
Are employees able to access the providers they need?
Are prescription benefits structured effectively?
Does the plan support the company’s workforce demographics?
Is the employer spending money on benefits that employees actually value?
These questions can lead to a more meaningful discussion than simply comparing premium increases from one year to the next.
Alternative Funding Strategies Are Receiving More Attention
Traditional fully insured plans are not the only option available to employers.
Depending on the company’s size, claims history, cash flow, risk tolerance, and objectives, employers may also evaluate alternatives such as level-funded arrangements, self-funded plans, health reimbursement arrangements, health savings account strategies, and other plan structures.
Level-funded plans, for example, can combine elements of traditional insurance with features associated with self-funded arrangements. They may provide employers with additional transparency into certain components of their healthcare spending while maintaining protections against excessive claims exposure.
However, no funding arrangement is appropriate for every employer.
The decision should be based on the organization’s circumstances rather than simply following what another company has implemented.
Pharmacy Benefits Deserve a Closer Look
Prescription drug spending has become another important component of the healthcare conversation.
Employers may focus heavily on the medical portion of their health plan while overlooking the structure of their pharmacy benefits.
Pharmacy costs can be affected by formularies, specialty medications, utilization management, rebates, drug classifications, and the contracts governing the pharmacy benefit.
That makes it important for employers to understand how their pharmacy benefits are structured and how those arrangements affect both company spending and employee costs.
A benefits review that examines medical and pharmacy expenses together can provide a more complete picture of healthcare spending.
Benefits Decisions Should Start Before Renewal
One of the most effective changes an employer can make is moving the benefits conversation earlier in the year.
Rather than waiting for the renewal proposal, leadership and benefits advisors can begin reviewing claims trends, plan performance, employee feedback, contribution levels, and available alternatives months in advance.
That additional time can allow employers to:
- Analyze current plan performance.
- Identify major cost drivers.
- Evaluate alternative plan designs.
- Review employee contribution strategies.
- Examine pharmacy and specialty-drug costs.
- Compare funding arrangements.
- Communicate potential changes before open enrollment.
Early planning does not guarantee lower costs, but it can give employers more information and more time to evaluate their choices.
The Role of an Employee Benefits Advisor
Healthcare benefits have become too complex for many employers to evaluate based solely on the renewal proposal.
A benefits advisor can help an organization examine plan design, funding options, claims information, employee contributions, compliance considerations, and alternative strategies.
The objective should not simply be finding the lowest-cost health plan. A successful benefits strategy needs to balance cost, risk, employee value, administration, and the organization’s long-term business objectives.
Looking Beyond the Annual Renewal
Healthcare benefits are no longer simply an annual insurance transaction.
For employers, they can affect operating expenses, employee satisfaction, recruitment, retention, and the overall employee experience.
The organizations that approach benefits strategically can begin evaluating their healthcare program as an ongoing business process rather than a once-a-year renewal decision.
That shift can give business leaders a clearer understanding of where their healthcare dollars are going and what alternatives may be available.
About Jennifer Schaefer
Jennifer Schaefer, MBA, ChFC, CLU, RHU, REBC, SHRM-SCP, is the Founder and CEO of JS Benefits Group, an employee benefits consulting firm specializing in healthcare strategy, benefits planning, cost containment, plan design, and benefits technology.
Jennifer is a Forbes Business Council Contributor and Co-Host of Executive Leaders Radio, where she discusses business leadership, employee benefits, healthcare strategy, and the future of work.
