Many of us look at our health plan renewal and focus on one number: the percentage increase.
It makes sense. That number is easy to compare year over year, and it is the number your broker leads with. But if that is the only thing you are looking at, you might be missing a much bigger picture.
The Math Behind the Number
Let’s say your company has a $5 million annual health insurance budget. If you accept a 10% renewal increase, that adds $500,000 in new annual expense.
On paper, that seems manageable. But that $500,000 does not just come out of the benefits line item. It comes directly off your bottom line.
Now let’s say your business operates on a 10% net profit margin. To make up for that $500,000, you would need to generate an additional $5 million in sales next year.
Not $500,000. Five million dollars.
That is the multiplier behind health insurance renewals, and it is why a modest looking increase can carry a much bigger impact on your business than the renewal spreadsheet suggests.
Questions Worth Asking Before You Sign Off
Before accepting your next renewal, it is worth taking a step back and asking a few questions:
- What is driving the increase?
- Which medical or pharmacy claims trends are contributing the most?
- Are there any short term opportunities to bring the cost down?
- What alternatives should be considered before accepting the renewal as is?
These are not complicated questions, but they are ones that often go unasked. And when they do get asked, the answers can open up options you did not know you had.
It Is About More Than the Number
A renewal increase touches more than your benefits budget. It touches your hiring plans, your pricing, your growth targets, and everything else tied to your bottom line. That is why it deserves a closer look than just a glance at the percentage.
The good news is you have more options than you might think, and understanding what is driving your renewal is the first step toward finding them.
If you would like to talk through what is behind your renewal this year, DM me for more information. We are happy to walk through it with you.