Compare employer and employee costs, participation and service issues before renewal. Use practical measures while protecting health information.
June 24, 2024 · Financial Forte Staff
Historical article: prepared retrospectively using information available as of June 24, 2024.
A benefits renewal can arrive as a single uncomfortable number: next year's premium increase. By then, the employer may have little time to understand whether the current arrangement serves employees well or whether a less expensive quote changes costs somewhere else. A midyear review creates room for those questions before the renewal deadline.
Look beyond the premium to participation, employee contributions, access, administration and service. Separate business decisions about the benefit offering from the fiduciary responsibilities involved in operating an ERISA-covered plan. The review should identify a specific improvement and a way to tell whether it worked.[1]
Measure the experience behind the invoice
Begin with basic facts: eligible employees, enrolled employees, coverage tiers and the contribution required from each group. Compare similar populations over time. A change in the percentage enrolled may reflect hiring or spouses' coverage rather than a change in satisfaction.
Ask HR what questions recur. Employees may misunderstand enrollment, have trouble finding an in-network provider or receive conflicting instructions from a carrier and an administrator. Those are different problems. Grouping all of them under “benefits complaints” makes it harder to select the right response.
Employee feedback can add context without requiring personal medical details. Ask whether instructions were understandable, whether people know whom to contact and what parts of the process are difficult. Participation should not become a pretext for asking a manager to investigate someone's diagnosis or treatment.
Health information has specific protections, and the employer's role as plan sponsor is distinct from its role in employment decisions. Access to information for plan administration does not create unrestricted permission to use it for employment purposes.[2] Work with the appropriate benefits and privacy professionals on what data can be shared and how it should be protected.
Compare total cost on a consistent basis
Suppose a company has 40 eligible employees and 30 enrolled in employee-only coverage. The monthly premium is $600 per enrolled employee. The employer pays $450 and the employee pays $150. At unchanged enrollment, annual employer premium cost is $162,000, while employees collectively contribute $54,000.
A proposed renewal raises the premium to $660. If the employer keeps its contribution at $450, each employee's share rises to $210, a $60 monthly increase, or $720 over a full year for each enrolled employee. The employer's premium expense appears unchanged, but the employee contribution rises 40%. Calling the arrangement cost-neutral would describe only the employer's side.
Alternatively, the employer could preserve the original 75% employer share. Its contribution would become $495 monthly and the employee share $165. The annual employer increase would be $16,200, calculated as $45 more per month for 30 people over 12 months, at the same 30-person enrollment. Employee contributions would rise by $180 per enrolled person per year.
Neither approach is automatically the right business decision. The company needs to assess affordability, workforce priorities, applicable requirements and its budget. These figures are invented and cover premiums only; administration, other coverage tiers and cost-sharing when people receive care are excluded.
Now suppose a competing plan has a lower premium but a different network and deductible. The review must include those changes before describing it as a saving. A lower payroll deduction may be valuable, but so is the ability to use necessary providers. Ask for the actual plan comparison rather than a premium-only summary.
Choose an improvement you can test
If enrollment questions are the main problem, a clearer explanation and a reliable contact route may help more than adding another benefit. If employees cannot access suitable providers, a communication campaign cannot repair the network. Match the action to the evidence.
For the hypothetical company, assume HR recorded 24 unresolved enrollment questions during the previous enrollment period. The team could introduce a short explanation of contribution amounts and deadlines, with a named contact and an agreed response process, then measure the number and type of unresolved questions during the next period. A reduction would be useful evidence about that process, not proof that the benefit caused higher retention.
Compare the measure fairly. More hires or a major plan change can produce more questions even when communication improves. Record the context and examine whether answers were accurate and timely, rather than setting a target that discourages employees from asking for help.
The trade-off is staff time and possibly additional provider support. Estimate those costs before calling the project free. A small employer may need a broker or administrator to handle questions that a larger HR team can manage internally. The best process is one the business can maintain consistently.
Keep the oversight connected to decisions
For an ERISA-covered health plan, prudent selection and monitoring of service providers and attention to reasonable expenses are part of the fiduciary framework. Hiring a benefits firm does not mean the employer can ignore the performance of the functions it retains.[1]
Document the issue, alternatives considered, information reviewed and reason for the choice. Identify who will follow up with a provider and when the result will return to the decision maker. A meeting note saying “discussed renewal” is less useful than a record of the cost and service questions that were resolved.
Keep individual health information out of ordinary management reporting. Request appropriate aggregate information and check whether a small group could still make someone identifiable. A report can be useful for plan decisions without becoming a list of employees' medical circumstances.
Start with one cost comparison and one recurring service problem. By reviewing both before renewal, the business can make a better-informed choice about where to spend, where to simplify and where a provider needs to improve. The objective is a benefit employees can understand and use, supported by an oversight process the employer can explain.
Related reading
- Owner Benefits Do Not Always Follow Employee Tax Rules
- Build Next Year's Benefits Budget Before Renewal Arrives
Have more questions about employee benefit costs, service and oversight? Email Dave at dave@financialforte.com to discuss your questions and next steps.
The contact invitation is current; it does not imply this contact path existed on the historical reference date.
Educational information, not personalized investment, tax, legal or benefits advice. Examples use hypothetical assumptions. Verify current rules and your circumstances before acting.
