If your business’s employer-sponsored health plan renews at the start of the calendar year, you’re probably negotiating next year’s rates right now, or you will be very soon. And the stakes are high and getting higher. Preliminary survey results from Marsh (whose Mercer business advises employers on health benefits) project that employers’ health benefit costs per employee will rise an average of 8.2% in 2027.
Here’s how I’d look at it: the renewal period is an opportunity. It’s your chance to figure out what your employees actually value, where your expenses are growing, and how to strike the right balance between cost and coverage. Let’s walk through it.
Before you change a single plan benefit, take a look at your enrollment numbers and listen to your employee feedback. Are people actually using the plans you offer? Do they understand their choices? You may be looking for ways to cut costs, and I get that. But a lower-premium plan can be a poor fit if the deductible, prescription coverage, or provider network makes care less affordable for your team.
Ask your benefits consultant for data on spending patterns and plan use (and to be clear, this data leaves out any employee’s medical conditions). These reports can help you spot opportunities to improve your plan design and your communication. For example, employees may not be using lower-cost care options simply because they don’t know those options exist. That’s a fixable problem.
And when you compare the plans you’re considering, compare what your employees will actually pay, including premiums and their likely out-of-pocket expenses. Not just what you pay.
Your consultant or insurance broker can explain the increases your insurer is proposing and compare competing options side by side on the same basis, including:
A lower quote often comes with trade-offs, and those trade-offs may matter a lot to your workforce. High-deductible health plans paired with Health Savings Accounts can appeal to some workers, but don’t assume everyone will embrace that option.
Pay particular attention to pharmacy coverage. Prescription drug benefits are among the fastest-growing expense categories out there. Ask what’s driving your costs, how rebates and fees are handled, and whether other contract arrangements might offer better value.
If your plan is self-funded, an independent review of your claims payments and pharmacy contract terms may uncover errors or charges worth following up on. A benefits advisor can help you decide whether the potential savings justify the cost of that review.
And for any plan you’re considering, ask for a clear explanation of any proposed wellness or care-navigation programs. How would employees actually use them? How would you measure the results? If nobody can answer that, it’s worth pausing.
Here’s the truth I want you to take with you: the cheapest plan isn’t necessarily the best choice for your business and your people. Changes that raise your employees’ costs can affect their ability to get care and how they feel about your whole benefits package. That, in turn, can affect hiring and retention.
So before you sign any renewal papers, model out several options using your expected enrollment, your employer contributions, and your cash flow. Insights lead to action, and numbers on paper make this decision a lot clearer.
Reach out to us. We can help you compare the financial impact of your renewal proposals, test different cost-sharing approaches, and build the plan you choose into next year’s budget. If you can, get in touch before the insurance negotiations begin, so you can use our analysis while it still counts.