Not "Very Demure", Not "Very Mindful", Not "Very Cutesy" - Managing Health Insurance Rate Increases

As we enter the final quarter of the year, many businesses across the region are receiving news of their health insurance rate increases for the coming year—and it’s enough to make any employer groan in frustration. The latest releases show large fully insured groups facing average increases of 20%, with some pushing beyond a staggering 40%. The ripple effects of these rising costs hit everyone: from the C-suite to frontline employees, straining budgets, morale, and future planning.

As someone who has been closely involved in the health insurance sector, I hear this frustration daily. You're being asked to do more with less, and these escalating premiums make it increasingly difficult to provide employees with competitive, comprehensive benefits while maintaining your bottom line.

The Growing Frustration for Employers

If you're feeling the pressure, you're not alone. For years now, health insurance costs have been climbing, and many employers feel trapped in a cycle of compounding increases, year after year. After a while, the question becomes: what options are left?!

These increases come at a time when inflation and other economic challenges are already pushing businesses to their limits. It’s hard to stomach a 20% increase—let alone a 40% spike—and absorb it without making sacrifices elsewhere, like cutting employee benefits or delaying investments in growth. While small group rates haven't surged as high as some predicted, any increase feels like a blow, especially when there’s no clear way forward.

Why the Sudden Spike?

Several factors are driving this surge in rates. From inflation in the healthcare industry to increased utilization due to post-pandemic care, insurers are adjusting premiums to protect their margins. But where does that leave employers? Should you simply accept these annual rate increases as an inevitable part of doing business?

Exploring Alternatives: Taking Control of Costs

The good news is that you don't have to. There are options—some more well-known, others that may feel like taking a shot in the dark—that can help you regain control.

If you're tired of the compounding interest of rising premiums, here's what you should be considering:

1. Self-Funded or Partially Self-Funded Plans

For companies that are tired of unpredictable, compounding rate increases, self-funding can be an attractive option. When done right, self-funding allows companies to take direct control of their health plans, paying for claims as they occur rather than prepaying large premiums. By customizing the plan to meet the needs of your workforce and leveraging stop-loss coverage for large claims, businesses can find more stability and predictability.

2. Captives

Not large enough for self-funding, or a little to risky for your appetite? Captive arrangements are becoming an increasingly popular choice for employers looking to spread risk while gaining control over their health insurance programs. These arrangements allow businesses to pool resources and share risk, reducing exposure to large claims and leveraging the group’s collective buying power to negotiate better rates.

3. Level-Funding

For smaller companies looking to balance risk and reward, level-funding offers a hybrid approach. It provides the predictability of fixed monthly costs with the potential of a refund if claims come in lower than anticipated. It’s a way to dip your toes into self-funding without jumping in completely.

4. Professional Employer Organizations (PEOs)

Another alternative to consider is partnering with a Professional Employer Organization (PEO). A PEO allows businesses to outsource employee management tasks like payroll, benefits, and compliance while gaining access to the PEO’s group health insurance plans. By pooling employees from multiple businesses, PEOs can offer lower rates and better benefits than many standalone employers can negotiate on their own. For companies facing significant rate hikes, this option provides immediate cost relief and reduced administrative burdens, giving you more time to focus on running your business.

5. Plan Design and Cost-Sharing Adjustments

Adjusting plan designs—whether it’s through higher deductibles, offering HSAs, HRAs, or tiered networks—can help mitigate rising premium costs.

Partnering

It’s a daunting landscape, that’s where having the right strategic partner comes in.

At Gilroy Kernan & Gilroy (GKG), we specialize in helping employers navigate the complexities of health insurance, offering more than just a quick quote—we work to understand your business and customize solutions that provide long-term relief from these year-over-year increases.

Whether it’s guiding you toward self-funded models, helping you understand captives, or optimizing your current plan design, we act as your partner, not just your broker. The days of "copy, quote, and pray" are over. Today’s environment demands strategic thinking and innovation, and that's what we bring to the table.

While the rate hikes are frustrating, they don’t have to dictate your future. Employers who explore creative, strategic options can regain control of their health insurance costs—and we’re here to help you every step of the way. Let’s take a shot in the dark together and find the solution that works for you.