If your company provides access to health insurance plans to employees, or is considering offering it for the first time, it’s time to become familiar with the annual renewals process.
Health insurance renewals are a yearly occurrence during which insurance carriers adjust their rates and offerings, and allow employers to select the best plans. The process obviously includes insurance companies and employers, and it also includes employees at various stages.
Why Your Health Insurance Rates May Increase Every Year
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Why Do Renewals Happen Every Year?
The answer is a little different for every party involved. For insurance carriers, renewals happen annually to make sure plans are up-to-date with rules and regulations. They also adjust pricing to take into account inflation in the health insurance industry, and reassess risk.
As an employer, renewals are an opportunity to tailor your employee benefits to align with what your team needs. Your company may have changed since you last signed up for your healthcare plan. Renewals give businesses the chance to pick new plans or reset contributions.
Renewals allow employees to change their plans based on their current needs. Employees will have the opportunity to switch plans, add a dependent, or opt out if needed. Or, if they don’t need to make changes, they can simply renew plans from the previous year.
Want guidance around evaluating your health insurance offering ahead of renewals? Download our free ebook for help: How to Evaluate Your Current Health Insurance Offering.
What Does the Renewals Process Look Like?
There are a few stages of the process, and it starts with the health insurance companies:
Reassessment stage. Insurance companies reassess pricing for the upcoming year and then decide on any altered costs and services to the employer. These costs typically rise each year to adjust for inflation, doctor’s fees, healthcare technology, and new drugs.
Presentation stage. Insurance providers present available plans to companies. As an employer, you will be presented with the options your employees will have access to and pricing for the upcoming year.
Selection stage. You’ll have the opportunity to select the plans your employees will have access to. Once you make your selections, you’ll choose your contribution amount (how much of the cost your company will contribute per plan for each of your employees).
Employee enrollment stage. After these selections are made, open enrollment will begin for your employees. During this period, your team will be presented with the plans you’ve selected. This is their opportunity to switch plans due to changing life circumstances and based on their budgets.
Completion stage. Once your employees have selected their plans, coverage is effective on the date your insurance provider or PEO stipulates.
What is the Timeframe for Renewals?
Not all plans renew on the same calendar year schedule. If you’re with a PEO, you’re on a master policy that must renew at a specified time, regardless of when your company signed on. For example, if you’re a Justworks customer, your renewals period begins in late August and employee open enrollment starts in late September. New plans go into effect in November.
Although you can’t choose the renewal date, master policies are what allow PEOs to give small businesses enterprise-level rates on health coverage.
What Steps Should I Take?
When it comes to health insurance renewals, clarity is key. To make the process easier on your team, try to communicate and educate employees prior to open enrollment.
Your renewals period marks a good opportunity to let your employees know that open enrollment is approaching, and what that will mean for their health coverage options. One tip is to survey your team about their employee benefits to get direct feedback on what kind of healthcare options they want to see. This information can prove helpful as you’re selecting plans for the coming year.
Once the open enrollment period begins, educate employees on any plan changes and walk them through their options. Barring a Qualifying Life Event such as marriage, divorce, or the birth or death of a child, employees will have to stick with the options they select until the next open enrollment period for the following plan year.
Health Insurance Renewals: A Positive Opportunity
At Justworks, we actually get excited about renewals. Why? Because they give companies like yours the chance to reassess the needs of your business and your team, and even find better coverage options. Taking this time period to consider what your team needs the most is an important step and it can greatly impact all of your employees. This is your time to pick the best options for your company which will contribute to a happy and healthy work environment.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.