A small employer I work with recently received a 12.1% increase on its health insurance renewal. It became a good example of how health insurance renewal tradeoffs actually work.

The group has three people enrolled, all with single coverage.

There were plenty of alternative plans available. But when I review a renewal, I don’t look at every cheaper plan as though it is equally attractive.

I’m also thinking about disruption.

Can we keep the same carrier?

Can we keep the same provider network?

Can we keep the same general type of plan?

Can we keep the way employees use the plan reasonably familiar?

And then, within those boundaries, how much can we do about the cost?

That is really what a lot of small-group renewal work comes down to.

Health insurance renewal tradeoffs: the knobs you can turn

Health insurance does not have one knob marked “cost.”

There are several:

Carrier
Provider network
Plan type
Deductible
Out-of-pocket maximum
Copays
Coinsurance
Prescription coverage
Employer contribution
Premium

Move one and something else may change.

A lower premium might require a higher deductible.

Another carrier might have a better rate but a different network.

An HSA-compatible plan might cost less but require employees to use their benefits differently.

A narrower network might create savings but affect someone’s doctor or hospital.

The job is not simply to find the lowest number on the spreadsheet.

Sometimes there are several reasonable choices. Sometimes, as I have written about before, there are no particularly good renewal options.

It is to decide which knobs are worth turning.

Start with the path of least resistance

Health insurance has a certain amount of inertia built into it.

People know their doctors. They know where they go for care. They are familiar with their insurance card, their copays and how their prescriptions work.

There is value in not disturbing all of that unnecessarily.

So in this case, I started by looking at what we could accomplish without changing carriers, without changing networks and without moving the employees into a fundamentally different type of health plan.

That left benefit design and premium as the primary variables.

The comparison looked like this:

Benefit	Renew Current Plan	Alternative	Near-Flat Renewal
Individual Deductible	$3,000	$5,000	$6,000
Family Deductible	$6,000	$10,000	$12,000
Individual Out-of-Pocket Maximum	$8,000	$7,150	$8,500
Primary/Specialist Copays	$15 / $50	$15 / $50	$15 / $50
Prescription Tiers	$10 / $50 / $125 / $300	$10 / $50 / $125 / $300	$10 / $50 / $125 / $300
Monthly Premium	$2,104.56	$2,023.26	$1,892.61
Renewal Increase	12.1%	7.7%	0.8%

The group’s current premium is $1,877.91 per month.

If they keep the current plan, the new premium is $2,104.56.

If they move to the third option, the premium is $1,892.61.

That is only $14.70 more per month than they are paying today.

For the entire year, the increase is $176.40.

So what did it take to make the increase almost disappear?

In this particular renewal, we could get the increase down to less than 1% without changing the carrier.

We could keep the same network.

And we could stay with the same general type of plan.

The most visible tradeoff was the deductible, which moved from $3,000 to $6,000 for an individual.

Other benefits moved too, which is why plans should never be compared on deductible alone. For example, the middle option actually has a lower individual out-of-pocket maximum than the current plan.

But the comparison gives us something useful.

Within this carrier’s available plans, we can see approximately how much the benefit structure has to change to take a 12.1% renewal increase down to less than 1%.

Now the employer can decide what continuity is worth

There is another way to look at the numbers.

Keeping the current plan costs $2,104.56 per month.

The near-flat alternative costs $1,892.61.

The difference is $211.95 per month, or $2,543.40 for the year.

So instead of asking:

“Do we want to accept a 12.1% increase?”

I think the more useful question is:

“Is keeping the current benefit structure worth another $2,543 to the company this year?”

For some employers, it will be.

For others, the higher deductible will be a reasonable tradeoff to keep the premium almost unchanged.

Neither answer is automatically right.

The point is to make the tradeoff visible. That is a big part of having a consistent health insurance renewal process rather than simply reacting to the new rate when it arrives.

Small employers usually cannot make the underlying trend disappear

There are larger employers that can directly attack claims costs through plan design, utilization management, pharmacy strategy, steerage and other approaches.

That is a different conversation.

A small employer generally has much less ability to change the underlying forces that cause health insurance rates to increase during the coming year.

Most of the available choices have already been designed and priced by the carrier.

So when another renewal increase arrives, much of the job becomes deciding how that increase is going to land.

Do we absorb more of it in premium?

Do employees absorb more through deductibles or other cost sharing?

Do we change networks?

Do we change carriers?

Do we change the employer contribution?

These are the health insurance renewal tradeoffs small employers face every year.

Premium is only one of the variables. Every choice moves one of the knobs.

The objective is not disruption for the sake of finding a lower rate.

It is to contain the disruption while managing a cost increase that may not be avoidable.

In this case, we could keep most of the familiar pieces in place and see exactly what it would take to make a 12.1% increase almost disappear.

The employer may still decide to pay the 12.1%.

But now it is a decision rather than just a renewal.

Client-identifying details and plan names have been omitted or generalized. The premiums and benefits shown reflect a specific employer renewal and are included to illustrate the decision-making process. Plan availability, eligibility, underwriting, benefits and rates vary by employer and are subject to current carrier and program requirements.

About the Author

For more than three decades, Ted Stevenot has helped Ohio small businesses and their owners evaluate health insurance and employee benefits as a partner at McCarthy Stevenot Agency, Inc.

He writes the Broker’s Desk series to document the real-world decisions, conversations and observations that come from helping small businesses navigate health insurance.

Talk With McCarthy Stevenot Agency

If your Ohio small business is facing a health insurance renewal increase, we can help you review the available options and understand the tradeoffs.

Sometimes the best answer is to keep the existing plan. Other times it may make sense to change the benefit design, network, carrier, funding arrangement or overall approach. The objective is to understand what each alternative saves, what it changes and whether the disruption is worth it.

Contact McCarthy Stevenot Agency to discuss your renewal, or call 513-891-9888.

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Disclaimer

Broker’s Desk is a series of observations from more than three decades of helping Ohio small businesses and their owners navigate health insurance. Some articles explain a process. Others tell the stories behind the work. Client-identifying details may be omitted or generalized to protect privacy. Plan availability, eligibility, underwriting, benefits and rates vary by employer and program. These articles are intended to help readers understand how experienced brokers think through real-world situations, not to suggest there is one right answer for every business or individual.