As renewal season comes around each year, employers everywhere brace themselves for what their new group health insurance premiums will look like in the new year—because chances are, they’ll be higher.
According to a survey of 300 large employers conducted by the Kaiser Family Foundation, this pattern of consistently rising group health insurance premiums isn’t going away. A whopping 96% of employers surveyed agree that the high costs of offering healthcare to their employees is excessive, and 87% believe the cost of providing health benefits to employees will become unsustainable in the next 5 to 10 years.
With even large employers expressing these concerns, it’s no wonder that small and medium size businesses (SMBs) are hit even harder by expensive annual rate hikes each year. When group health insurance premiums go up, it gets that much harder to meet the employer contribution requirements.
The good news about all of this is that your broker will let you know well in advance of your actual renewal date if you’re going to have rate increases. That means you have time to make a plan for the future to ensure you can afford to offer your employees the kind of quality health benefits they’ve come to expect from you.
This article will walk you through three options for moving forward after getting an unaffordable rate increase:
- Ask your broker for a more affordable quote
- Switch to a high deductible health plan with a group coverage HRA as a supplement
- Cancel you group policy and sign up for a QSEHRA or ICHRA
Why do health insurance premiums prices go up each year?
Before we dive into your options, let’s talk about why health insurance premiums go up in the first place. There are a lot of reasons group health insurance premiums go up when you’re looking to renew your plan.
For example, overall increases in healthcare costs play a part in your premium price, as well as the age of your employees and where they live.
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.
The hard part about these rate increases is that many of the factors that cause them are completely unavoidable. You certainly 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. So when your rate goes up, it’s there to stay.
Option 1: Ask your broker for a more affordable quote
The first thing you should do if your broker tells you that you’re going to have a rate increase is to simply ask for a more affordable quote. Remember, it’s your broker’s job to find you the most affordable plan they can, so it’s in their best interest to do a little digging.
However, keep in mind that the likelihood that they’ll be able to find you a better rate isn’t very good. Like was mentioned above, many of the factors influencing your group health insurance premium are out of your control, so it’s unlikely your broker will be able to do much for you. But as the saying goes, it certainly never hurts to ask.
Option 2: Switch to a high deductible health plan with a group coverage HRA as a supplement
If your broker isn’t able to come up with a more affordable quote, the next option is to talk to them about switching to a high deductible health plan and supplementing it with a group coverage health reimbursement arrangement (GCHRA).
Generally speaking, the higher your plan’s deductible is, the lower your premium will be. So by moving to a plan with a higher deductible, you’ll be able to get a more affordable monthly premium.
However, with a higher deductible comes more out-of-pocket costs for your employees before their insurance will start to cover anything. That’s where a GCHRA comes in. A GCHRA is an HRA designed to be paired with a group health insurance plan to cover the qualifying medical expenses that aren’t fully paid for by the group health insurance plan.
Employers simply set a monthly allowance of tax-free money for employees to spend on the healthcare expenses they need, and then they’ll submit them for a full reimbursement up to their monthly allowance.
Option 3: Cancel you group policy and sign up for a QSEHRA or ICHRA
If offering a high deductible health insurance plan is still unsustainable for your organization, your last option is to cancel your group policy and sign up for an HRA. An HRA is a formal, IRS-approved health benefit that allows employees to choose their own individual health insurance policy and get reimbursed, tax-free, for their premiums.
While a GCHRA is an HRA that’s designed to work alongside a group health insurance policy, there are other HRAs that you don’t have to offer with group health insurance, including the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA).
Qualified small employer HRA
A QSEHRA is a type of HRA for employers with fewer than 50 full-time equivalent employees. This HRA is best for small employers who have employees with a variety of different insurance statuses and want to provide a benefit to everyone—all full-time employees are automatically enrolled whether or not they have insurance.
Individual coverage HRA
An ICHRA can be used by organizations of all sizes, either as a standalone benefit or alongside group health insurance. You can offer the ICHRA to certain classes of employees, such as your part-time workers, while you offer your group plan to another class, like your full-timers. Classes can also be used to vary allowance amounts, so if you want to offer your employees in California more than your employees in Minnesota to help offset the higher premiums, you can.
While renewal season can be a stressful time as an SMB, it doesn’t have to be. Understanding your options and being open to more affordable plans, like HRAs, will help you continue offering the kind of health benefits that allow you to recruit and retain employees. The best part is, you don’t have to go it alone. PeopleKeep’s user-friendly software and award-winning customer support team are here to help you make a smooth transition from an unaffordable group health insurance policy to a flexible and sustainable HRA.