If your business’s health insurance premiums seem to be rising every year, you can’t imagine it. Health care costs have been rising for decades, and those increases may be reflected in the premiums your business and employees pay.
For small businesses, even a small increase in premiums can have a significant impact on the budget. So why are health insurance costs rising? What steps can you take to manage them?
Why are group health insurance premiums rising?
Health insurance premiums are closely related to health care costs. When the cost of medical care, prescription drugs, and other health services increases, health plans may need to charge more to cover those costs. Several factors can cause health insurance premiums to rise, including:
- Prescription drugs cost more. New specialty drugs and high-cost treatments can significantly increase health care spending.
- Make greater use of health care services. When people use more medical services, overall health care costs increase.
- Chronic health conditions. Conditions like diabetes, heart disease, and asthma can require ongoing care and expensive treatments.
- Costs for hospitals and healthcare providers continue to rise. Higher labor, technology and operating costs affect the price of medical services.
- Hospital and health system integration. Changes in the health care market may affect provider costs of care.
- New and expensive treatments. Advances in health care can lead to better treatment options, but they can also come with higher costs.
These factors all impact the annual premium increases employers see when renewing group health insurance.
How rising premiums affect California small businesses
Health insurance costs can vary widely depending on state, region, health plan, provider network and other factors. For California employers, health insurance can represent a large portion of the overall employee benefits budget. When employers pass on some of the premium increases through increased employee contributions, employees also feel the impact.
That’s why when reviewing group health insurance, it’s important to don’t just focus on the premium itself. Our goal is not just to find the lowest priced plan. It’s about finding a balance between cost, coverage, provider access and staffing needs.
How can small businesses cope with rising health insurance costs?
You may not be able to control rising health care costs, but you can find ways to manage the impact of these increases on your business.
1. Check your plan options when renewing
Don’t automatically renew the same plan every year without checking your options. Your broker can help you compare available plans, networks, coverage and costs. Even if you continue with the same health plan, reviewing your options can help you understand what you’re paying for and whether it’s still a good fit for your business.
2. Consider a defined contribution model
Defined contribution models can give employers more control over their health insurance budgets while giving employees more choices.
For example, through CaliforniaChoice, employers can decide how much to contribute to employee insurance. Employees can then choose from available health plans and insurance options that suit their needs. This helps create more predictable employer contributions while providing employees with flexibility in how they use their benefits.
3. View the total value of your benefits
Health insurance is just one part of an employee benefits package. When comparing options, look at what else is included or available, such as dental, vision, life insurance, chiropractic and acupuncture benefits, and other employee savings plans.
CaliforniaChoice also offers value-added programs to help employees save on prescription drugs, fitness, hearing care, pet insurance and more.
4. Work with a broker
Health insurance can be complex, especially when you’re trying to balance rising costs with employee needs.
A broker can help you review your current coverage, compare available options, and determine which strategies may be suitable for your business. They can also help you understand how different employer contribution methods affect your budget and employees.
Find the right health insurance strategy for your business
As health care costs change, health insurance premiums are likely to continue to change. But that doesn’t mean your only option is to accept higher costs without reviewing your options.
Revisiting your coverage, contribution strategies and available options can help you make more informed decisions about employee benefits.
If you’re ready to explore your options, CaliforniaChoice gives California employers access to multiple health plan and insurance options through one plan, with the flexibility to build benefits strategies around their budgets and employees. Please contact your broker for a CaliforniaChoice quote. If you are not working with a broker, you can search for one here.
