If your business’s health insurance premiums seem to go up every year, you’re not imagining it. Health care costs have been rising for decades, and those increases can show up in the premiums your business and employees pay.

For small businesses, even a modest premium increase can have a big impact on the budget. So, why are health insurance costs rising and what can you do to manage them?

Why Are Group Health Insurance Premiums Increasing?

Health insurance premiums are closely tied to the cost of health care. When the cost of medical care, prescription drugs, and other health services increases, health plans may need to charge more to cover those expenses. Several factors can contribute to higher health insurance premiums, including:

• Higher prescription drug costs. New specialty medications and high-cost treatments can significantly increase health care spending.
• More use of health care services. When people use more medical services, overall health care costs can increase.
• Chronic health conditions. Conditions such as diabetes, heart disease, and asthma can require ongoing care and expensive treatments.
• Rising hospital and provider costs. Higher labor, technology, and operating costs can affect the price of medical services.
• Hospital and health system consolidation. Changes in the health care market can affect how much providers charge for care.
• New and expensive treatments. Advances in medical care can bring better treatment options but they can also come with higher costs.

These factors can all play a role in the annual premium increases employers see when their group health insurance renews.

How Rising Premiums Affect California Small Businesses

Health insurance costs can vary significantly by state, region, health plan, provider network, and other factors. For California employers, health insurance can represent a significant part of the overall employee benefits budget. Employees also feel the impact when employers pass some of the premium increase along through higher employee contributions.

That’s why it’s important to look beyond the premium itself when reviewing your group health insurance. The goal isn’t simply to find the lowest-priced plan. It’s to find a balance between cost, coverage, provider access, and the needs of your employees.

How Can Small Businesses Manage Rising Health Insurance Costs?

You may not be able to control the rising cost of health care, but you can look for ways to manage how much those increases affect your business.

1. Review your plan options at renewal

Don’t automatically renew the same plan every year without reviewing your options. Your broker can help you compare available plans, networks, coverage levels, and costs. Even if you stay with the same health plan, reviewing your options can help you understand what you’re paying for and whether it still fits your business.

2. Consider a Defined Contribution model

A Defined Contribution model can give employers more control over their health insurance budget while giving employees more choice.

With CaliforniaChoice, for example, an employer can determine how much it wants to contribute toward employee coverage. Employees can then choose from available health plans and coverage options that fit their needs. This can help create a more predictable employer contribution while giving employees flexibility in how they use their benefits.

3. Look at the total value of your benefits

Health insurance is only part of the 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 programs.

CaliforniaChoice also offers value-added programs that can help employees save on areas such as prescription drugs, fitness, hearing care, and pet insurance.

4. Work with a broker

Health insurance can be complicated, 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 what strategies may work for your business. They can also help you understand how different employer contribution approaches could affect your budget and your employees.

Find a Health Insurance Strategy That Works for Your Business

Health insurance premiums are likely to continue changing as the costs of health care change. But that doesn’t mean your only option is to accept higher costs without reviewing your choices.

Taking a fresh look at your coverage, contribution strategy, and available options can help you make more informed decisions about your employee benefits.

If you’re ready to explore your options, CaliforniaChoice gives California employers access to multiple health plans and coverage options through one program, with the flexibility to build a benefits strategy around their budget and employees. Talk to your broker to get a CaliforniaChoice quote. If you’re not working with a broker, you can search for one here.