Has your company seen rising or falling health insurance costs in recent years? What a question, right? Rising premiums are a given. The only question is how reasonable, or not, the increases have been. According to reports, the cost of employer-sponsored healthcare coverage in the U.S. will rise another 6% to 9% in 2025, and for several small business CFOs I know, their premiums went up 10%, 15% or more.
Despite this reality, is it possible to negotiate flat healthcare premiums for your organization?
The CFO’s role
When I was the finance executive for Campbell Soup’s largest supply chain operation, based in Northwest Ohio, we engaged in collective bargaining every three years. Negotiating healthcare cost and plan design changes often dominated the discussion. Fortunately, we had a team of employee benefit experts to clarify the options, analyze the economics and then present our proposals to the union committee.
Soon after becoming CFO of a small business, I was called into an unscheduled meeting. Our employee benefits consultant (until that moment, I didn’t know we had one) was in the neighborhood and wanted to discuss our upcoming renewal. He then proceeded to inform us, matter-of-factly, what our healthcare premiums would be in the new year. It was too late to explore alternatives. Soon after, we “interviewed” several other employee benefits consultants and selected one accordingly. During our recent renewal, after receiving an initial proposal with a significant premium increase, we negotiated a multi-year, flat premium agreement.
Selecting your employee benefits partner
When selecting an employee benefits consultant to be your partner, research the firm, assess the broker’s reputation, understand their areas of expertise, analyze key metrics and otherwise gain comfort. In addition, meet the lead executive and others who will be supporting you, get a sense of their personality and style, ensuring appropriate chemistry. You should also understand their motivations (do they genuinely want to help their clients or simply make a buck?) and look for inquisitiveness, listening skills, problem-solving ability and other such traits. Most importantly, find someone you trust.
Ideally, your benefits partner will become one of your first speed dials, your trusted advisor, and your sounding board, for benefits issues and beyond. As CFO, your role in building the relationship starts with being direct and clarifying your expectations and priorities. Be inquisitive, asking questions and tapping into your benefits partner’s knowledge and expertise, enabling you to become more competent and thereby make better decisions. Be a good communicator.
Clearly articulate your concerns, being honest, candid and transparent, and then be open to dialogue with your partner to effectively resolve any issues. Explore and leverage as appropriate your partner’s many services. Don’t take your benefits consultant for granted, just as they better not take you or your company for granted. Be reasonable in your expectations. And, importantly, have trust in your partner and their expertise — that’s why you engaged them in the first place.
Once you have selected an employee benefits partner, you want to leverage the relationship to the fullest. For example, they can support you in defining a benefits strategy, developing plans to manage benefits-related costs and performing benefits-related “block and tackle” activities.
Your partner can also educate you on reporting requirements, new legislation and benefit trends, and they can educate your employee base on deriving value from the many great benefits you offer. In addition, they can evaluate your plan designs, audit your recordkeeping, and otherwise facilitate compliance. And, of course, your employee benefits consultant should play a key role in successfully negotiating renewals.
Negotiating a successful renewal
We successfully negotiated a multi-year healthcare agreement, including flat premiums, while maintaining consistent plan designs. We also negotiated flat or lower premiums for our other employee benefit offerings. To negotiate your successful renewals:
- Know your benefits strategy. What are the needs, wants and expectations of your employees? And what is the impact of your overall business and HR objectives as well as budget constraints? Should you be offering highly competitive benefits to attract top talent, or will a more basic package suffice? By knowing your benefits strategy, you can determine if any changes to your current mix of benefits is needed.
- Be proactive. Coordinate with your benefits consultant to define the timeline for every aspect of the renewal process, from preparing the requests for proposal to delivering employee communications, well in advance (e.g., 6+ months before renewal).
- Get “out to market” early. Your current carrier, if they want to retain your business, may present a renewal plan with seemingly favorable terms. But to lock in this “special pricing,” they may require your firm commitment within one to two weeks. To the extent you already have competitive bids in hand from other carriers, because your benefits partner initiated the RFP process early, you will be in a to assess how competitive your current carrier’s “special pricing” really is.
- Expect alternatives. Your benefits consultant should obtain proposals from multiple carriers, including quotes for a variety of plan designs from each, and they should perform due diligence on each proposal accordingly. A good partner will be “turning over every stone” to ensure they ultimately bring the best deal to the table on your behalf.
- Review proposal. Your benefits partner, once they have obtaining and analyzed each proposal, should review them in detail with you and your team, comparing and contrasting each proposal to your current plan, highlighting pros, cons and other points of interest, and making a recommendation accordingly. That said, you need to have trust in your partner that they have brought the best deal to the table or if they recommend negotiating further.
- Revisit plan designs. One way to manage cost is to revisit the design of your medical and other benefit plans. Sometimes, a different plan design can be a win/win, better meeting the needs of your employee base while costing less than your current plan.
- Multi-year contracts. Those carriers offering a multi-year agreement option often offer incentives to gain your commitment, so be open to the possibility.
