How to Combat Annual Healthcare Increases
How to combat surprise healthcare hikes and keep every month of runway you fought to raise.
It happens every year.
Founders hit “refresh” on their inbox and feel their stomach drop. A broker email with the subject:
“Upcoming Renewal Increase.”
One minute their burn projects 16 months of runway; the next — 14.
Because of health insurance? Brutal.
Startup leaders scrutinize every dollar: salaries, benefits, equity. But the possibility of a 20% insurance increase never cross their mind. Now every hire, every product bet, every late-night pizza triggers the same mental math:
Will we make payroll in January?
Actually, this mistake is common. You’re moving at a million miles a minute — why would you slow down to think about benefits?
This article exists so you don’t repeat it.
I’ll break down why rates spike, what drives 2025’s jumps, and how to hedge against them before they hit your ledger.
1. Why carriers raise rates
Regulation shifts — New mental-health parity rules, HSA limits, ACA updates.
Higher medical spend — Carriers price in labor shortages, inflation, and sicker populations.
Employee choice window — Open enrollment lets staff add dependents or upgrade plans. More enrollees + better plans = higher cost.
Plan tune-ups — Your company’s demographic, headcount, and locations change; so do your rates.
Timing matters:
PEO plans renew 2–3 months before their mid-year anniversary (Aug 1 quotes for a Nov 1 plan).
Open-market plans usually renew Dec 1 or Jan 1; quotes drop around October.
Recommendation:
Don’t wait until the last minute. Shop the market 3-4 months before your plan renews.
If you wait for the carrier’s rate hike, every rival bid anchors to it. Early quotes can give you leverage (and options).
2. What’s inflating 2025 premiums
Hospital consolidation — Merged health systems demand richer contracts; insurers pass the tab to you.
Specialty drugs — GLP-1s and new gene therapies add millions to carrier budgets.
Inflation itself — Average cost for even minor procedures are in the thousands. It’s not slowing down.
Big buyers — Tech giants snapping up clinics (think Amazon & OneMedical) set their own (higher) prices.
Recommendation:
The average large-group is renewing at 11%-13% annually. Budget for this.
3. How to deflate your renewal
Steer to value-based care — Offer plans that reward high-quality, lower-cost providers.
Educate & inform — You can have the best benefits in the world. If your people don’t know what they are, how to access, or what they mean… it’s wasted spend.
Push preventive visits — Annual screenings and vaccines are $0 in-network (for now); market this.
Lean on telehealth — Virtual visits trim co-pays and time off the clock.
Guard the network — Working remote? Verify doctors are in-network before you launch a plan.
Favor generics & biosimilars — Make the cheaper script the default; teach employees how to ask.
Build a “blue-zone” culture — Mental-health days, EAPs, open talk about wellness. Cost-effective and sticky.
10 questions before you sign the renewal
What’s our benefits goal: retention, hiring, or both?
How do employees actually feel? (Run a survey)
Where do we sit against market benchmarks?
Are we matching carrier networks to remote hires?
Do we measure plan utilization?
How are we educating employees on preventive care and generics?
Which cost-containment ideas has our broker or PEO proposed?
How strong is our mental-health and family-care support?
What’s the cost of not changing anything this year?
If we switched PEOs or brokers, what would success look like?
Benefits increases happen. Every. Year.
Know the levers, plan for the hike, and negotiate like runway depends on it (because it does).
If you want a second set of eyes on your renewal or a benchmark check, DM me.
Let’s make sure next year’s dreaded broker email doesn’t blow up your burn.
Talk soon,
Cris Cafiero
The Back Office Newsletter
2025 SMB Benefits Benchmarking Report from Dylan Hughes @ Sequoia
Small companies (< 100 employees) juggle premium talent expectations with razor-thin budgets. Knowing how peers are adjusting benefits helps you stay competitive without overspending.
Read Dylan’s analysis on the 2025 SMB benefits benchmarks here:
The recommendations provided in this article are intended for informational purposes only. They should not be construed as direct advice or guidance. Readers are encouraged to consult with a qualified professional before making any decisions related to compensation, benefits, or equity contribution strategies.