Unmasking the Annual Health Insurance Renewal Process

By Trevor Burns, PHR on Aug 03, 2020
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During the annual renewal process, employers may choose their group health insurance plans and employees may choose their coverage for the year ahead.

Circumstances can change substantially over the course of a year for both employers and employees. For example, companies may experience positive or negative revenue fluctuations or employ more or fewer workers in a given age range. Workers may need more robust benefits based on changes in health status or new family situations.

What is the Health Insurance Annual Renewal Process?

The annual renewal process allows employers to tailor benefits to employee needs and the company’s finances by evaluating existing plans, making revisions or selecting new plans, and, as needed, resetting both business and worker contributions to the plan.

Employees, too, may make new choices about the coverage that best suits them. Some of the most common changes employees make during the renewal process are switching out certain benefits, adding a dependent or opting out of coverage – for example, enrolling in a plan offered through a spouse’s employer.

So, health insurance renewals are the logistical means through which employers provide employees with medical coverage for the coming year. It’s a critical period, because group health insurance is among the larger expenditures – as well as a key recruitment and retention tool – for small business owners.

Axcet HR Solutions Employee Benefits Services for Small Businesses

When do Health Renewals Happen?

Small business owners who do not rely on a professional employer organization (PEO) like Axcet HR Solutions to handle benefits should contact their insurers 90 days before the end of the annual contract to learn of any changes to coverage options and pricing. That gives these employers enough time to comparison shop other carriers before deciding what plans to offer employees and to manage the renewal process internally.

Employers that are PEO clients will renew at a specific time of year, regardless of when the company started working with the PEO. The PEO will facilitate each stage of the renewal process on the employer’s behalf, reducing the legwork required of small business owners.

How do Health Insurance Renewals Work?

Small business owners should familiarize themselves in advance with the renewal process so they can maximize the time available to choose the best options for their teams and companies.

  1. Insurer Reassessment – First, insurers reevaluate and often increase rates for the upcoming annual contract period based on inflation, new physician and drug costs and fees for medical technologies. The insurance company also assesses its insureds’ use of the plan over the past year, including changes in risk levels and other factors that impact the cost of premiums. Carriers typically finalize this step about 90 days prior to the renewal date.
  2. Pricing and Options Presentation – Once they determine their new pricing, insurance carriers typically present that information to employers, along with descriptions of the plans available to employees. Small businesses that work directly with an insurance carrier or with a broker, rather than with a PEO, should proactively request pricing 90 days before their existing contracts end if the information has not been provided by that time.
  3. Selection – During the selection phase, employers choose which of the available plans they will offer their employees. They also determine in this stage how much the company will contribute toward the cost, or premium, for each employee’s plan.
  4. Open Enrollment – If your small business offers employee health benefits and has more than 50 employees, your company must offer an “open enrollment” period each year. All small businesses that work with PEOs will follow this practice, regardless of the number of people they employ. Employers should let employees know open enrollment dates as soon as they are scheduled. Workers will have an opportunity to participate in an open enrollment meeting that will acquaint them with each plan being offered, including the costs, how coverage works, and other considerations that will help them make informed decisions. During open enrollment, eligible employees can opt-in or out of the employer-offered plans as best fits their personal health circumstances and budgets.
  5. Completion – After eligible employees have enrolled in their chosen plans, coverage becomes effective on a date the insurance provider designates. ID cards for insured employees typically arrive within 10 business days of the provider receiving employee enrollment information.

Finding the right group health insurance plan for your employees is key to ensuring a high-quality benefits package and reasonable premiums. It also plays an important role in maintaining high job satisfaction levels and good health among employees – but it’s time-consuming and potentially confusing for small business owners who go it on their own. We suggest leaning on an experienced PEO like Axcet to help you alleviate renewal period-related stress and stretch your budget while still providing your small business employees with Fortune 500-level benefits.

Written by Trevor Burns, PHR

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