Many California small business owners dread receiving their annual health insurance renewal packet because they know it’s going to show a rate increase. In today’s world, it’s not uncommon for medical inflation to be higher than the economy growth rate. This means most business owners expect to see double-digit rate increases every year. In fact, an industry analysis by KFF shows that many small group carriers do increase premiums by 10% or more every year.
While these rate issues are stressful, the biggest problem they bring with them often isn’t the cost itself but rather the timing of it. Some business owners set aside their renewal packet for several weeks because they’re deep in other projects. Then, when they do look at it, they realize they only have a few weeks left before the effective date. That doesn’t leave much time to look at alternatives, leading to rushed decisions.
This is why the team at JC Lewis recommends treating your policy renewal as an annual health insurance audit. Instead of waiting until the last minute to renew, take your time to analyze your insurance needs, look at how the current policy met or did not meet those needs, and then consider alternatives. To help you with this process, we’ve put together a renewal checklist to help California employers evaluate their options.
The 90/60/30-Day Renewal Timeline
Being proactive and doing a health insurance audit every year first involves creating a timeline so you don’t wait until it’s too late. First, you should start about 90 days before your policy takes effect for the next year. This gives you the time you need to research other options, determine your needs, and communicate these changes to your team.
90 Days Before the Effective Date
- Audit your W-2 employees to create an updated roster with necessary information.
- Review your year-to-date health plan feedback.
- Determine your budget and other financial boundaries for the next year.
Goal: Establish your budget and confirm your full-time equivalent (FTE) employee count.
60 Days Before the Effective Date
- Receive your renewal notice from your current insurance carrier.
- Work with an independent broker to browse the California small group market, including both the off-exchange commercial market and the exchange platforms such as Covered California for Small Business (CCSB).
Goal: Compare your renewal rate against other options and identify plan areas that could be adjusted based on employee needs.
30 Days Before the Effective Date
- Finalize your plan, tiers, and employer contribution levels
- Provide eligible employees with open enrollment information, plan summaries, and other documents.
- Hold open enrollment Q&A sessions.
Goal: Collect all enrollment, change, and waiver forms from all eligible employees to verify that you are meeting all necessary participation requirements.
Renewal Week
- Submit all finalized documents to your selected insurance carrier.
- Confirm transition dates
- Verify that your employees have all necessary documents and insurance ID cards.
Goal: Ensure that your coverage transitions to the new plan with no disruption in service for your team.
The Rate Increase Response: Evaluating Your Options
Many business owners assume that when they get their renewal notice with the rate increases, they either have to accept it or not. However, there are other options. Here are some of the things you can do when you see a rate increase:
1. Keep the Plan
The simplest solution is to keep your current plan and absorb the increased cost. This is often the best strategy if you’ve been happy with your carrier, your employees are getting the care they need, and the increase is less than five percent. Changing plans can cause additional work, and it may not be worth it to save only a small amount.
You also don’t have to absorb all the costs. For example, if your policy is to cover 70% of the cost of the baseline plan, you can keep that percentage. In that case, the business and each employee effectively split the increased premium.
2. Modify the Plan and Keep the Same Carrier
If you’re looking at a modest rate increase of up to around 12 percent but your employees are very happy with the current carrier, you could modify the plan to reduce costs. Look at what the carrier offers and what your employees need. You could introduce different metal tier plans and cover one baseline option, or you could switch from a PPO network to a high-performance HMO network. Changing deductibles or prescription copay tiers can also help reduce the rate increase without disrupting the care your employees have come to rely on.
3. Switch Carriers
If your renewal increase is over 12 percent or there are competing plans that save you a significant amount, it may be time to switch carriers. You’ll want to do a full market analysis across all of California’s small group insurers and Covered California for Small Business to determine what options may fit your needs and budget.
4. Expand Your Options
If you want to lock In a fixed budget year over year while also giving your employees flexibility, you may want to consider transitioning from a percentage-based model to a Defined Contribution model. This means you would provide a fixed dollar amount per employee. Your employees can use this credit towards a variety of different plans randing from a High-Deductible Health Plan paired with a Health Savings Account to higher-tier copay plans.
Key California Compliance Considerations During Renewal
If you’re making adjustments to your plan, you do need to make certain those changes don’t push you out of compliance with federal and state guiltiness. Here are things to keep in mind:
Contribution Floor: Make certain your contribution remains at or above the required minimum, which is typically 50% of the employee-only rate for the lowest-cost plan offered.
Participation: Verify that the minimum required number of employees are participating in the plan. Usually, this is 70% of your eligible employees after you exclude those with valid waivers. If participation has dropped under this minimum, you will have to renew during the Special Open Enrollment Window (usually November 15 to December 15). During this time, California regulations prohibit insurance carriers from denying applications based on employee participation.
Uniform Eligibility: If you change who is eligible (such as offering insurance to those who work between 20 and 29 hours a week), you must offer insurance to all employees who meet your eligibility requirements. You cannot pick and choose who you provide coverage for.
Partner with an Annual Review Specialist
Renewing your health insurance policy shouldn’t be a stressful, last-minute decision. By starting your review 90 days out, evaluating the alternatives, and carefully planning how to mitigate the increase, you can both protect your employees’ access to healthcare and your budget.
If your renewal feels higher than expected, send it to J.C. Lewis Insurance Services for a no-cost comparison before you accept it. We may be able to help you avoid a major cost spike without losing coverage.
