Start by finding out why the rate moved
A renewal letter gives you a number, but not always a reason. Before you pick a response, find out what moved the rate, because different causes point to different fixes.
Rates are generally built from a few pieces: the broad cost trend for medical care and prescriptions, your group's own claims experience, changes in your headcount or enrollment mix, and the carrier's pricing and network decisions. How much weight your own claims carry depends on your group size and the type of coverage.
Ask for the renewal rationale in writing. If your group is large enough to receive claims reporting, ask for that too, along with a summary of large claims and pharmacy activity.
- Was the increase mostly market trend, or something specific to our group?
- Did enrollment, age mix or dependent count change?
- Are there alternative plan designs available at renewal that were not offered first?
- What is the deadline to accept, change or decline the renewal?
Negotiate the renewal or take the group back to market
A renewal is an offer, and it is not always the final answer. Your broker can ask the carrier to review the rate, quote other plan designs, and explain the assumptions behind the pricing. Sometimes the answer is no, but it is a reasonable first step.
The next step is marketing the group, which means asking other carriers to quote comparable coverage. This works best with lead time. Underwriters will want a current census, plan details and participation information, and that takes time to gather and review.
Compare more than the headline rate. Look at the network, especially whether your employees' doctors and hospitals are in it, plus the pharmacy benefit, how deductibles and out-of-pocket costs apply, and the quality of service for HR. A lower rate on a network your people cannot use is not much of a solution.
Switching also means a transition: new ID cards, new communications, and possibly employees starting over on deductibles if the change happens mid-year. Plan your messaging early so the change does not catch anyone off guard.
The short version
A higher renewal is a prompt to look at the whole set of options, from negotiation and re-marketing to plan design and contribution strategy, before you absorb the cost or cut coverage.
Change the plan design, not just the plan level
If the rate is the rate, the plan itself is the next lever. Design changes move cost between you and your employees, so decide deliberately who should carry more of it and when.
- Deductibles and copays: more cost-sharing eases premium pressure but raises what employees pay when they use care.
- HSA-eligible high-deductible plan: it pairs with a health savings account. Contribution limits are set each year, so check the current figure, and eligibility rules are specific. Employer HSA contributions are one way to cushion the change.
- Narrower or tiered networks: fewer or preferred providers can change the rate, with the tradeoff of less choice.
- Multiple plan options: employees can choose between a richer and a leaner plan, and many employers build their contribution around a middle option.
- Pharmacy design: formulary tiers and specialty drug rules can matter as much as the medical deductible.
Rethink how you contribute
How you split the premium is a separate decision from which plan you offer. Many employers pay a larger share of the employee-only premium and a smaller share toward dependents. Others set their contribution against a reference plan, so the extra cost of a richer plan falls on the employee who chooses it.
Some employers explore a defined contribution approach, where the employer sets a fixed amount and employees decide how to use it. An individual coverage HRA is one structure that reimburses employees for individual-market coverage. It comes with notice, employee class and eligibility rules, so work through it with a licensed advisor.
Check your obligations before changing anything. If you have 50 or more full-time equivalent employees, you are generally an applicable large employer under the ACA. That means offering affordable, minimum-value coverage to employees who average 30 or more hours a week. The affordability standard is set each year, so confirm the current figure and test any contribution change against it.
Two housekeeping items are worth a look. Confirm you have a Section 125 cafeteria plan so employee premium shares can be taken pre-tax, and ask your tax professional to verify how it applies to you. Also review eligibility rules such as waiting periods, hours requirements and dependent verification, and make sure they match your plan documents and the law.
Look at funding, navigation and the rest of the picture
Some larger groups can look at alternative funding, such as level-funded or self-funded arrangements with stop-loss coverage. These change how you pay for claims and can add variability to your costs. Rules and availability in California depend on group size, and stop-loss terms differ, so treat this as a careful conversation with a licensed advisor rather than a quick switch.
Cost also follows how employees use care. Care navigation, telehealth, pharmacy support and chronic condition programs can help people find appropriate care sooner. What they do for your rates depends on the program and your group, so ask what results you can reasonably expect before you add one.
Voluntary benefits do not lower your health premium. They can, however, help employees cover gaps when you shift to higher cost-sharing. Accident, critical illness and hospital coverage paid by employees are common examples, and they are worth introducing alongside any plan design change rather than after.
What to do this month
You do not need to solve everything at once. Work through the steps below in order, and keep your decision deadline in view.
If you want a second set of eyes, a benefits review with an advisor is one option for comparing these levers side by side.
- Request the written renewal rationale and any claims or utilization reports available to your group.
- Confirm your decision deadline and how much time a change needs for applications and employee notices.
- Ask for alternative plan designs at renewal and for quotes from other carriers.
- Decide your priorities: protecting provider access, protecting employee take-home pay, or limiting year-over-year change.
- Check ACA obligations, your Section 125 plan and your eligibility rules.
- Draft employee communications early, in every language your team uses.
Common questions
Can I change plans or carriers in the middle of the plan year?
It depends on the carrier's rules and your plan documents, and changes most often happen at renewal. A mid-year change can reset employee deductibles and require new notices, so ask your carrier and advisor about timing and impact before deciding.
If I have to cut costs, can I stop offering coverage to some employees?
Not necessarily. If you are an applicable large employer, with 50 or more full-time equivalent employees, the ACA generally requires affordable, minimum-value coverage for full-time employees, who average 30 or more hours a week. Confirm the details with a licensed advisor before changing eligibility.
Is a high-deductible plan with an HSA a good fix?
It can work well for some workforces and strain others, especially employees with limited savings or ongoing medical needs. HSA eligibility rules are specific and contribution limits are set each year, so check the current figures and test the design against real employee scenarios.
This article is general education for employers, not legal, tax or plan advice. Benefit rules and options depend on your group size, location and plan, so talk with a licensed advisor before making changes. Sixth Man Employer & Insurance Services, CA Insurance License #0I01929.