The annual benefits renewal process gives small business owners a chance to review their existing employee benefits plans and, potentially, to revise them based on changes in the company’s and workers’ needs. To make sure the options you offer at renewal time each year are the right fit, plan strategically and well in advance of the renewal date.
Follow these five steps to get ready for a successful annual renewal:
1. Establish objectives
Offering employee benefits can serve several purposes. Benefits may help a small business better compete in attracting top talent, improve employee health, increase employee loyalty or create a more diverse workforce, among others. Identifying what you want your company’s benefits to achieve will help clarify the best mix of benefits to offer your employees.
2. Prepare in advance
It’s a good idea to start preparing for the annual renewal process about 90 days in advance of the enrollment deadline. That strategy gives you plenty of time to pull together the information you’ll need, including:
Details about your company’s existing benefits packages, such as costs, coverage, networks and providers;
Plan performance metrics, including which services were used most, whether claims were paid quickly and whether plan spending met projections;
Employee demographics, including age, health concerns and family status;
Changes in the company’s financial status;
Changes in workforce size; and
Feedback from employees about what they like or don’t like about the existing benefits plan.
Feedback is important for determining which benefits employees value most. If the company is paying for benefits workers don’t use, it may make sense to discontinue those options. Alternatively, you may want to consider adding benefits employees have expressed interest in that the organization hasn’t offered previously.
Armed with employee feedback and the other information above, determine whether existing plans are still a fit or if the organization’s benefits package should be adjusted to better align with employees’ needs and the company’s budget.
Smaller businesses that work with a professional employer organization have access to the PEO’s review and evaluation of health coverage available from multiple insurance carriers. The PEO also helps its clients identify benefits trends, such as holistic wellness or student loan repayment options, that employers may want to add to their plans.
Companies that don’t work with a PEO should undertake this evaluation on their own. Before deciding to renew their existing plans, they should learn about plans and coverage available from competing carriers, as well as industry benefits trends.
4. Set a Budget
It can be challenging to establish a number for non-salary benefits. But doing so ensures the business will have enough money to pay for benefits and maintain the coverage employees rely on throughout the year. In creating a budget, factor in mandatory benefits – those employers generally are required to provide under federal or state law, such as workers’ compensation and unemployment insurance – and optional benefits, such as retirement and 401(k) plans, paid vacation time, and vision and dental coverage. Employers are required to provide employee health insurance if they have 50 or more full-time employees and/or full-time equivalents (a combination of part-time employees whose work hours, added together, equal a full-time employee).
Establishing a budget range, rather than a set figure, gives a company some flexibility in considering plan options its benefits provider offers.
5. Obtain Renewal Rates
Insurance providers calculate premiums based on factors specific to each benefit plan, which often include inflation, employee demographics, employee health and ratio of premiums to claims. It’s common for costs to increase year over year.
PEOs secure renewal rates on behalf of their clients, seeking both to keep increases minimal and to provide robust benefits options a small or mid-sized business could not afford on its own. Small business owners who don’t work with a PEO may contact insurance carriers directly to explore costs for benefits they’re considering.
After completing the process outlined above, you will be well prepared to choose the options that will protect employee health and well-being in the year ahead.