What to do when your group health insurance premiums keep going up
If you’re an employer or HR professional, you’ve probably noticed that your health insurance costs go up each year. Are renewals a necessary evil of group health insurance? Maybe. But good news for you, there’s options to consider that might help you get out from between a rock and a hard place. This article shares how to best navigate the potential rise in your group health insurance rate upon renewal and still offer great benefits for your employees.
The latest data from the Kaiser Family Foundation shows that employer-sponsored family coverage premiums have surged by 20% in the last five years and a staggering 43% over the past decade. Navigating the rising tide of healthcare costs is a challenge faced by many businesses, but fear not, there are strategies available to soften the blow of these escalating rates. The majority of HR leaders, CFOs and business owners we talk to count rising health insurance costs as a major threat to the health of their business.
In this helpful post, we will explore various options to consider when confronted with the dilemma of increasing health insurance premium expenses.
Why do health insurance premiums prices increase each year?
Group health insurance premiums go up for several reasons. General market conditions, a change in your plan type, the age of your employees, and where your workers live all play a part in your premium price.
One big reason behind the rise in health insurance costs is increasing medical costs. According to the Wall Street Journal this past fall, health insurance costs for group plans are taking the biggest jump they’ve had in years.
As your employees get older, move to areas with fewer health resources, and the cost of things like prescription drugs and medical services rise, your health insurance company has to raise their rates to make up the difference.
There’s also the fact that if one of your employees falls ill or has a significant healthcare utilization, that can affect the rates for everyone on your team.
The hard part about these rate increases is that many of the factors that cause them are unavoidable. You can’t stop your employees from having birthdays, moving to another ZIP code, or anything else that puts them at greater health risk in the eyes of your health insurance company. You can’t prevent your employees from getting sick, obviously. So when your rate goes up, it’s there to stay.
Now, let’s dive into your options for saving on health coverage when that happens.
What to do when your group health insurance premiums go up upon renewal
Notice we said when they go up, not if. It’s not common to see a double digit renewal. For companies like yours, those type of hikes year after year just aren’t sustainable. Here are the options to consider if your group health insurance premiums go up.
Option 1: Cancel your group policy and sign up for an HRA
To combat the escalating costs of health insurance, consider discontinuing your group policy and implementing a health reimbursement arrangement (HRA) for your employees. HRAs offer a cost-effective alternative to traditional group health insurance, allowing employers to provide tax-free reimbursements for health insurance premiums and qualifying out-of-pocket expenses.
There are two main “flavors” of HRAs that can serve as substitutes for group health insurance: the qualified small employer HRA (QSEHRA) for organizations with fewer than 50 full-time equivalent employees, and the individual coverage HRA (ICHRA) for organizations of all sizes. ICHRA enables employers to categorize workers into different classes and customize benefit designs to suit each class’s unique needs, including varying allowance amounts. This flexibility makes the ICHRA a valuable solution for applicable large employers (ALEs) seeking to comply with the Affordable Care Act’s employer mandate.
Here are a few advantages of HRAs over group health insurance plans:
Flexibility & Cost Control: With an HRA, you have the freedom to set your employees’ monthly allowances, eliminating concerns about price increases. This flexibility allows you to tailor the allowance amount to your liking, giving you full control over your budget.
Predictability & Efficiency: HRA funds remain with the employer, meaning any unused allowance at the end of the year goes back to your organization. You can rest assured that there are no annual rate hikes with an HRA, providing stability in your health benefit costs.
Empowerment and personalization: Unlike a one-size-fits-all group health plan, an HRA empowers each employee to use their benefit on the expenses that are most important to them. They have the opportunity to select an individual insurance plan that best suits their needs through the health insurance exchanges.
As an HRA administration software provider, Take Command simplifies the management of your fresh health benefits effortlessly. We meticulously review your employees’ reimbursement requests to ensure they align with your intended spending. Additionally, we assist in maintaining IRS compliance and our top-notch customer support team is always on standby to guide you through every stage of the process.
Option 2: Ask for a more affordable quote
If you’re not quite ready to part ways with your group health plan, don’t shy away from having a candid conversation with your broker or insurance provider. Share your concerns openly, explore the potential for negotiating reduced rates, and see if there’s room for collaboration.
While it’s true that health insurance prices are influenced by various factors beyond your control, there’s always a chance that your broker could help you secure a more favorable rate. Remember, it never hurts to ask and see what possibilities may arise.
It’s also a good idea to consider the different types of group plans, like level-funded, fully-funded, etc. There can be savings making that switch. It’s also possible to price out PPOs vs HMOs or EPOs, as well as the metal tiers associated with them.
Option 3: Switch to a high deductible health plan that’s HSA eligible
If your insurance provider cannot offer a more budget-friendly quote, consider discussing the possibility of transitioning to a more economical plan with them, such as a high deductible health plan (HDHP).
Although these plans boast the lowest premiums, they do come with higher deductibles. The increased deductible means that your employees will have more out-of-pocket expenses before their insurance coverage kicks in.
Additionally, you can complement an HDHP with a health savings account (HSA), enabling employees to allocate pre-tax funds towards covering their medical expenses. HSAs are great financial boosts to your employees.
Option 4: Roll out wellness programs
By investing in wellness programs, you are not only improving the overall health and well-being of your employees but also setting the stage for long-term cost savings on medical expenses. These programs go beyond just offering gym memberships or health screenings – they encompass a holistic approach to health that includes fitness challenges, stress management workshops, and smoking cessation programs.
When you promote a healthy lifestyle within your organization, you are actively working to prevent chronic health conditions and reduce the need for extensive healthcare services. By encouraging employees to prioritize their health and well-being, you are fostering a culture of wellness that can have a positive impact on both their personal lives and their productivity at work.
Wellness programs are an investment in your most valuable asset – your employees. By providing them with the resources and support they need to prioritize their health, you are not only showing that you care about their well-being but also creating a healthier and more engaged workforce. So, consider implementing wellness programs as part of your overall strategy to manage rising health insurance costs and create a positive and thriving work environment for your employees.
Option 5: Increase your employee contributions
Over half of the CFOs, HR leaders and business owners we surveyed said that raising employee contributions was their main strategy for combatting rising healthcare costs. Personally, we don’t recommend this. Placing a greater financial burden on employees doesn’t seem like a good play. It could negatively affect your employee satisfaction rates or turnover rates. Best to explore all of the above options first. Just our two cents.
Final thoughts
Navigating the challenges posed by the increasing cost of health insurance requires a strategic approach that prioritizes the well-being of both your organization and its employees. By taking proactive measures, employers can effectively handle rising premiums while offering valuable benefits to their workforce.
Exploring alternative options, such as HRAs, allows you to maintain competitive health benefits that not only attract but also retain employees. With the support of Take Command’s intuitive HRA administration software and exceptional customer service team, transitioning from an unsustainable group health insurance plan to a flexible and sustainable HRA becomes a seamless process.
