Renewal Season: Preparing Your Company and its Employees for the Unexpected

Make no mistake about it: change is coming.

This year’s renewal season is likely to bring with it many unexpected and unwelcome surprises to both employers and employees. Most significant among them are the premium increases that may catch some off guard as the carrier renewals come in.  

While perhaps unwelcome, these premium increases are not unwarranted.

A significant driver of higher-than-usual insurance premium increases this year is the skyrocketing use of a newer class of tremendously popular weight-loss medications. Known as GLP-1 drugs, these new medications have become “all the rage” among celebrities, influencers, and the general public who follows them. Additionally, we have seen higher than normal “high-cost claim activity.” Due to an uptick in high-cost catastrophic claims activity for many groups, insurers are accounting for these losses when setting the following year’s premiums.

Seeming to be the “miracle drug” for those who struggle with their weight, medications such as Wegovy and Zepbound came onto the market and practically overnight were in peak demand. We have now arrived at the point where most insurance providers are excluding them from their formularies, unable to keep pace with the surging demand and the claim costs associated with covering GLP-1s.

Insurance companies were unprepared for the surge in claims tied to these drugs, leading to large financial losses on their own balance sheets. As a result, insurers are now working to recuperate those losses, in part through premium hikes passed on to policyholders. Premium increases as high as 17 to 30% have been coming in from carriers. While some insurers are excluding weight-loss medications from their formularies in 2025, employers and employees are still bearing the brunt of these claim costs for the most recent plan year.

This leaves both employers and their employees at an uncomfortable crossroads: How to manage costs without compromising on health plans to the point where both higher prices and reduced benefits are too painful to absorb?

For Employers: Get Creative and Be Proactive

To mitigate the impact of these increases, employers need to find creative ways to strike a balance between providing robust benefits to their employees while managing what will likely be significantly higher costs next plan year. Employers strive to recruit and retain the best available talent in the market; the last thing they want is to have their valued team members thinking that something is being taken away (either from their benefits or their wages).  

Here are a few strategies we are working with clients to explore and implement renewal season:  

Creative Plan Designs: Employers should work with their benefits advisors to consider various adjustments that can be made relative to plan design, such as increasing plan deductibles or making modifications to the menu of plans offered to employees. Some may consider eliminating the more robust, more expensive plans and introducing more cost-effective options, such as High-Deductible Health Plans (HDHPs) paired with Health Savings Accounts (HSAs).

Adjusting Employee Contributions: Adjusting the contributions that employees make toward their monthly premiums is another way to share the cost burden. However, this needs to be done thoughtfully and carefully to avoid having too much impact on employees’ take-home pay, which could be misconstrued as a wage decrease. It is important to avoid sending the wrong message to employees, especially in the context of the ongoing competition to attract and retain top talent.

Incentivizing HSAs: Offering an HSA with a higher employer contribution can help steer employees towards lower-cost plans. For example, an employer could fund $600 or more into the employee’s HSA, which could have the effect of offsetting the higher premium contributions, making it a more attractive option. This, again, serves as a good-faith gesture that the company is doing everything it can to shoulder its share of the cost burden and to insulate employees from premium inflation to the greatest extent possible.

Proactive, Effective Communication: Clearly explain the coming changes to employees, as well as the reasons behind them. In so many cases, proactive communication and ongoing education are the keys to keeping employees invested in the company’s overall trajectory. Examples of such a strategy might include a company-wide “town hall” or webinar that allows team members to react to the news in real time and ask questions that immediately arise. Other employers may include a letter from leadership delivered with the open enrollment guide, addressing the causes of rising healthcare costs, explaining why changes to benefit plans are necessary, and communicating how the company is doing its best to minimize the impact on its workers.  

Employers should also take the extra effort to clearly explain how and why employees should consider and benchmark new plan options — especially HSAs — with which many employees may be unfamiliar. Illustrative examples like the one below are useful tools to help employees understand and visualize their own unique healthcare and financial situations.

Assessing Self-Funded Plans: It’s possible that this year’s premium hikes could cause more companies to consider the self-funding route (which would insulate the company from carrier premium increases). While this type of plan is usually present in larger companies, we are starting to see such arrangements trickle down to smaller and mid-sized companies. In such a plan, the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. While self-funding is certainly not for everyone, we encourage some to work with an advisor like LoVasco to perform an analysis to determine if such an arrangement is even within the realm of possibility. Such an analysis will consider factors including cash flow, industry trends, and projected claims experience. These are reviewed to make a data-informed recommendation to those considering self-funding.  

For Employees: Explore Your Options and Educate Yourself

Employees will likely take the news that costs are rising or benefit options are being altered with displeasure. But this presents an opportunity for employers to not only get ahead of the messaging but also to take proactive measures to implement changes that will help ease your employees and their families through this transition.

Reviewing Existing or Potential Providers: Remind employees to double check if their doctors, specialists, and preferred hospitals are in-network for the (new) plan options available to them. Going out of network can drastically increase one’s healthcare costs, and it’s not entirely uncommon for carriers and providers to make network changes that can have a surprising and significant financial impact.

Assessing Specific Healthcare Needs: Encourage employees to consider any known upcoming healthcare needs for the year. For example, if someone is planning a major procedure like knee surgery or anticipates a forthcoming pregnancy, make sure they pick the plan that aligns with these expected costs. Similarly, plan participants should review their prescription needs to ensure that all existing and anticipated medications are covered under the (new) plan selection — particularly in light of the new weight-loss medication exclusions mentioned previously.

Comparing Spousal Coverage: If an employee’s spouse has access to benefits through their own employer, advise your employee to compare the company’s plans and costs against those of the spouse’s. Consider whether it makes sense for one or the other to cover the whole family, or if splitting coverage between the two employer plans might be more cost-effective.    

Education on HSAs and FSAs: Many employees remain somewhat or entirely unclear as to how HSAs can be a powerful tool for cost-savings and tax-deferment, especially for those in high-deductible plans. Educate the team to understand that, unlike FSAs, HSA contributions roll over year to year, so they don’t have to worry about losing unused funds at the end of the year. Make sure that employees understand that, if they choose to have an FSA, they will want to plan accordingly so that their FSA contributions are as close as possible to their estimated medical expenses. This will help them avoid losing any leftover money at the end of the year.    

Being Mindful of the Enrollment Window and Terms: Remind employees open enrollment is the one opportunity to make changes to benefit plans, unless they happen to have a qualifying life event (e.g., marriage, birth of a child, etc). They don’t want to miss the deadline, especially if this year’s enrollment is an “active” one, for which the employee must actively re-enroll or lose coverage (as opposed to a “passive” enrollment, for which the employee is automatically re-enrolled in their existing plan).

Staying Informed and Actively Engaged: We typically advise that employers encourage their employees to ask questions and attend any employer-hosted meetings or webinars that offer education on these topics. If they’re confused about their options and fail to seek clarity (especially with the pending changes affecting coverage and costs), they could misconstrue the necessary plan adjustments as either: a.) the employer is making the employee pay more or b.) the employer is taking benefits away from the employee. Neither is true, of course, which is why you want to create the environment in which the employee feels heard, educated, and valued.

It’s Okay to Ask for Help

Just as we recommend the employers encourage employees to ask for help, we also advise employers and their dedicated Human Resources professionals to seek help, education, and guidance on everything relating to the administration of employee benefit plans. Conceding that few people welcome change, especially when the change is as significant as we expect most renewals to be this year, turning to a helpful second set of eyes and ears is something that should be encouraged as well.

By being proactive and informed, both employers and employees can better navigate the challenges of this renewal season and make choices that best suit their financial and healthcare needs. My door is always open, and I’m always willing to help.