It’s already started for many food and beverage manufacturers: healthcare open-enrollment season. This year is no different than recent years in most ways: Companies with 50–500 employees are getting hit with health insurance cost increases of 6.5% to 8% a year. That’s double inflation, already affecting one of the top spends for any company. 

To deal with this, many F&B manufacturers rely on their insurance brokers to negotiate with their carriers, and it usually goes something like this: Clients get a renewal from their carrier that’s a 10%–12% increase YoY. Their broker spends about eight weeks negotiating and comes back with a 5%–9% renewal, and the client signs off on that. 

Healthcare insurance has become a runaway cost. A typical California employer with 200 employees pays about two million dollars a year in health insurance costs, which increases to almost $2.4 million, which increases to almost $2.6 million, $2.9 million, and so on. How can you combat these increases? Your broker may try competing insurers, but changing networks is very difficult on employees, plus it usually doesn’t result in the kind of savings that make it worth the pain.

ERA has already seen four clients this year with renewal rates of 40% or more. These increases are untenable, whether 14% or 40%. If you’re simply crossing your fingers and hoping your broker comes up with something, then you’re not putting yourself in a good position. Hope is not a strategy.

Most employers are not being presented with any kind of creative, out-of-the-box ways to fight these increases while keeping employees whole. Contrary to popular belief, however, there are things you can do to control these costs.

Don’t judge a broker based on their brokerage.

Not all brokers are created equal. The work and capability of a broker does not typically have anything to do with their brokerage; it’s about how they run their individual practice. Regardless of the name behind them, be sure to continually evaluate the work they are doing on your behalf.

Choose the right broker for your needs. Different brokers have different strategies, different relationships, and different capabilities within the industry. They might have expertise to squeeze pharmacy dollars out of a plan or a specialty in self-funded or captive insurance. No broker does everything well, and choosing the right broker(s) for your specific needs will help you get better quotes.

Employ a pragmatic, transparent approach to evaluating your insurance spend. If you have low renewal rates, don’t be complacent. Find out why. A client with 220 people on their plan thought they were in a great position because their carrier had given them only 1%–2% renewals for the past three years. 

When ERA requested the actual data around the healthcare plan, the carrier balked. After piecing the full picture together from disparate sources, ERA found the client was paying $3 million a year in premiums, but on average, they only had $2.2 million in claims. The carrier was making more than three-quarters of a million dollars a year in profit. It’s no wonder they were offering such low renewals!

F&B manufacturers have enough challenges to deal with without having to absorb soaring insurance costs. Contrary to popular belief, there are things you can do right now to combat your rising renewal rates. With a strategic methodology to uncover as many creative, valid, compelling solutions as exist in the market, you can move the needle on reducing your insurance spend for 2024.