An employee benefits plan renewal should be a decision, not a default.
Ahead of open enrollment, employers face a familiar annual cycle. They receive the group health plan renewal notice, review the changes and decide how to move forward. Premium hikes, increased out-of-pocket costs, narrower networks and reduced coverage can make renewal painful. Instead of simply accepting the status quo, employers should determine whether the current plan still delivers the right value for both the company and its employees.
Staying with your current plan may seem like the easiest option, but that doesn’t make it the best one. On the other hand, higher costs or less favorable terms don’t automatically mean switching will produce a better result.
Deciding whether to renew or explore other options is a business decision that can affect health care spending, HR workload, recruiting and retention and the overall employee experience.
Start With a Review of Your Current Benefits Plan
Before looking at alternatives, establish how well the existing program is performing. This will help you decide whether it’s worth exploring other options. If you decide to shop for a new health plan, this assessment will help you determine your priorities.
What has changed since your last renewal?
Cost changes are only part of the equation. Look at:
- Premiums and employer contributions
- Deductibles, copays and total out-of-pocket costs
- Network or formulary changes
- Employee demographics or workforce composition
- Hiring and retention priorities
- Company budget and business objectives
How are employees actually using the plan?
Enrollment numbers don’t tell you how much value workers are obtaining from their benefits, and a plan can look competitive on paper while still falling short for the people using it.
Look beyond enrollment numbers and ask:
- If multiple plan options are provided, which plan options are employees selecting?
- Are employees taking advantage of preventive care available through the plan?
- Are certain benefits consistently underused, and do you understand why?
- Are employees raising recurring questions or complaints?
- Based on conversations and surveys, do employees understand what their plan covers and how to use it?
6 Signs It May Be Time to Change Your Benefits Plan
Once you’ve reviewed your current plan, you’re ready to consider whether a plan change may be in order. If any of the following six statements are true, another plan may suit your needs better.
1. Costs are increasing faster than the value you’re receiving.
A higher renewal deserves scrutiny, particularly if employees are also absorbing higher out-of-pocket costs. Multiple years of increases can make the cumulative effect especially difficult to sustain.
2. Your workforce has changed.
Changes within the plan aren’t the only ones that warrant attention. Company growth, new locations, or changing worker demographics can alter what employees need from their benefits. Even if the plan hasn’t changed substantially, it may no longer be a good fit.
3. Employees are consistently dissatisfied with the plan.
Recurring concerns about affordability, provider access, prescription coverage or claims problems deserve attention. Look to employee surveys, HR questions and utilization data to determine whether employees are obtaining value from their benefits.
4. Your benefits aren’t supporting recruiting and retention goals.
Benefits can influence an employee’s decision to join or remain with an organization, particularly when competing employers offer more robust or affordable coverage. Consider whether the package still compares favorably with what competing employers offer. In addition to benchmarking, exit interviews can also provide insights into why employees leave and whether benefits play a role.
5. Your current plan offers limited flexibility.
Employers may need different plan choices, contribution strategies or benefit options as the organization evolves. If your plan does not accommodate the changes you need, it may be time to explore different options.
6. You haven’t seriously evaluated alternatives in several years.
Renewing year after year without testing the market can make it difficult to know whether your current arrangement is still competitive. If you’ve been in the same plan for a while, even if you think it’s still meeting your needs, exploring your options may be worthwhile. You may find new plan design solutions that were not available the last time you looked.
When Renewing Your Current Plan Makes Sense
Frequent plan changes can drain resources and cause disruption. This may be worthwhile if the plan is not meeting your needs and better options are available, but switching isn’t always the right move.
Renewal may make sense when:
- Costs remain manageable.
- Employees are satisfied.
- Provider access is strong.
- The plan fits workforce needs.
- Changing would not result in meaningful improvement.
- A market comparison confirms the existing plan remains competitive.
The objective isn’t to change plans every year. It’s to make sure staying put is an informed decision.
Don’t Compare Plans on Premium Alone
The plan with the lowest premium isn’t always the best option. There are many other issues to consider.
- Employer cost. What will the company actually spend on health benefits when all costs are totaled?
- Employee cost. What will employees pay in premiums and in deductibles and copays when they receive care?
- What services, prescriptions and benefits are covered?
- Can employees keep the providers they use?
- Plan design. Do deductibles, copays and out-of-pocket limits fit employee needs?
- How difficult will the plan be for HR to administer?
- Employee experience. What support is available to employees when they have questions or concerns about coverage and claims?
- What is the employer and workforce receiving in return for the total amount being spent?
Consider the Employee Impact Before Switching Plans
Spreadsheets make it easy to compare costs and coverage, but spreadsheets don’t always tell you the full story of how benefit changes affect your workforce. Before switching plans, consider what the consequences will be for workers.
Will employees have to switch providers? A change in networks can force employees and their dependents to find new doctors or facilities, which can be especially disruptive for people receiving ongoing care.
Prescription coverage changes can also be disruptive. If the new plan has a different drug formulary, plan members may find that their current prescriptions are no longer covered at an affordable price.
Plan design changes can create additional challenges. If the new plan has a higher premium, employees may be upset when they see more money taken out of their paychecks. If the deductibles or copays are higher, they may be surprised when they try to access care. Strong benefits communication can help educate employees, so they know what to expect, but simply giving them plan documents during open enrollment may not be enough to prepare them for changes to their costs.
Questions to Ask Your Benefits Advisor Before You Renew
Your benefits advisor should guide you through the renewal process and ensure that you are in the best plan for your needs. Before you renew, talk to your benefits advisor and ask:
- What is driving our renewal? Ask your advisor to explain the factors behind the renewal terms and what they mean for your company.
- How does this renewal compare with similar employers? Are other employers seeing similar plan changes, and are they deciding to renew or shop?
- What alternatives have you evaluated? Even if you’re not planning to switch, you should have an idea of how your current plan compares to other options. Ask your advisor for a comparison.
- What would employees gain or lose if we changed plans? Ask for a clear breakdown of the changes. How would costs increase or decrease, and what would the changes be to coverage, networks and formularies?
- Are there plan design changes that could improve value without changing carriers? Staying with the carrier may be less disruptive than switching to a new carrier, so it’s worth seeing whether there are other plan design options or if elements of the plan can be negotiated.
- Are there other funding or benefits strategies we should consider? A fully insured group health plan may not be your only option. Ask your advisor for an overview of your other options, such as an Individual Coverage Health Reimbursement Arrangement (ICHRA) or a level-funded or self-funded plan.
- What should we be thinking about beyond this year’s renewal? The cumulative effect of rising health costs may make your current strategy unsustainable. Even if the costs are still acceptable this year, discuss what your options are going forward if costs continue to increase without providing additional value.
Make Benefits Planning a Year-Round Process
Waiting until immediately before open enrollment limits the ability to explore alternatives, including other carriers and plans as well as other funding strategies. Employers need time to review the renewal, compare options, model costs, make decisions and communicate changes to workers.
To avoid a rushed decision, approach benefits planning as a year-round process rather than an annual transaction. This approach allows employers to consider how the plan actually meets the needs of workers throughout the year, and it can help employers avoid overlooking alternative strategies.
Throughout the year:
- Pay attention to complaints and questions regarding benefits.
- Include questions about benefits during exit interviews.
- Review available utilization data to understand how employees are using the plan.
- Learn about alternative funding options.
- Watch trends in benefits and costs.
Make Employee Benefits Plan Renewal an Active Decision
Before you sign your next renewal, make sure you understand what you’re choosing and what other options may be available. For some smaller employers, those options may extend beyond traditional fully insured coverage to strategies such as level funding, self-funding or direct provider arrangements.
If you’d like to understand how self-funding works and whether it could be a good fit for your company, read this guide.
