Your health plan renewal is a compensation decision

Your health plan renewal is a compensation decision. But most CFOs and HR teams don’t run it like one.

A 10% renewal increase doesn’t hit everyone on the plan equally.

A senior employee earning $150,000 can probably absorb a cost shift.

But an employee earning $45,000 might have to choose between coverage and groceries. Or gas. Or rent.

The Federal Reserve Bank of New York published research last month showing that firms facing sharp premium increases raised wages about one percentage point less than they otherwise would have. A study in JAMA found that took 5% of household earnings (over $125k) between 1988 and 2019.

One point doesn’t sound like much until it’s your lowest-paid employees who don’t get a merit increase.

The renewal lands on the benefits team’s desk.

The downstream impact lands in the wage budget.

That comes out of merit increases, bonus pools, and promotions.

So the question isn’t only, “How do we manage the renewal?”

It’s also: Who is this increase landing on, and what does it force us to trade off elsewhere?

If your renewal strategy doesn’t include the wage budget, you’re making a compensation decision by accident.