(By Warren Smith-Insurance Producer, Group Benefits/Life Insurance)

At renewal time, the pressure to control health insurance costs is real. The 2025 Kaiser Family Foundation (KFF) Employer Health Benefits Survey confirms what most employers already feel, employer-sponsored health coverage continues to grow more expensive for both organizations and employees. As premiums rise year after year, the appeal of a lower-cost plan option becomes stronger.

Lowering insurance premiums seems to offer immediate benefits. It reduces the company’s fixed expenses and helps manage short-term budget pressure. But in employee benefits, the cheapest plan rarely costs the least over time. The true cost often appears in places that don’t show up on a renewal spreadsheet.

Many low-premium health plans achieve those savings by increasing deductibles, raising out-of-pocket maximums, and shifting more costs to the employee through coinsurance or narrower provider networks. While this response reduces the employer’s premium contribution, it increases the financial exposure employees face when they need care.

According to research published in the Journal of Managed Care & Specialty Pharmacy (JMCP), higher cost-sharing is consistently associated with reduced use of outpatient services and lower medication adherence. Importantly, the research shows that patients often reduce both necessary and unnecessary care when faced with higher out-of-pocket costs. In some cases, decreased adherence and delayed care are associated with increased downstream costs, including hospitalizations and more intensive treatment later.

In other words, higher deductibles may reduce utilization in the short term, but they do not selectively eliminate only low-value care. Employees frequently postpone preventive visits, specialist consultations, and prescription refills because of cost. What begins as a manageable condition can evolve into a larger, more expensive medical issue.

Its impact extends far beyond claims data. Health care affordability remains a significant concern for working adults. Financial stress increases when employees feel that health insurance is technically available but practically unaffordable. Stress affects focus, engagement, and workplace performance. Over time, dissatisfaction with benefits can influence morale and turnover, especially in competitive labor markets where benefit packages are closely compared.

Employers sometimes believe that they should choose a cheaper insurance plan in years with low claim rates. However, employer-sponsored coverage is priced within broader risk pools and governed by federal rating rules that limit how much individual claims directly affect premiums. A lower claim amount in a particular year may reflect a decrease in the utilization of medical resources rather than an improvement in health status. If employees are delaying care due to higher cost-sharing, claims may temporarily appear lower, while underlying risk remains unchanged.

Administrative burden is another hidden cost. Plans with narrower networks, more restrictive prior authorization requirements, and higher cost-sharing often generate increased employee questions and complaints. The HR team may need to spend more time dealing with billing disputes and explaining program limitations. While these costs are harder to quantify than premiums, they impact operational efficiency and employee trust in the benefits program.

None of this suggests that employers should default to the richest plan available. Relying solely on a high-price strategy is not advisable. Instead, employers should focus on intentional benefit design, balancing affordability with meaningful access to care. A sustainable approach considers workforce demographics, expected utilization patterns, long-term cost trends, and employee experience.

At renewal, the most important question is not which plan has the lowest premium. It is which plan will deliver sustainable value for both the organization and its people. Would employees be willing to use this insurance? What financial risk is being shifted? How will this design affect employee morale, employee retention, and future claims volatility?

When employers examine the full picture, it becomes clear that the lowest-priced option on paper can carry substantial hidden costs over time.

At Huggins and Bliss Sequoia, we believe that benefits strategies should extend far beyond annual contract renewal negotiations. We work with employers to evaluate workforce demographics, analyze claims trends, assess funding structures, and strategically design benefit packages aligned with long-term business goals. Our approach is proactive and consultative, not transactional. By looking at cost, utilization, employee experience, and risk exposure together, we help organizations build benefit programs that are sustainable, competitive, and growth orientated. Managing benefits isn’t about finding the cheapest plan, it’s about building the right one.

2025 Employer Health Benefits Survey | KFF, www.kff.org/health-costs/2025-employer-health-benefits-survey/. Accessed 2 Mar. 2026.

Cost-Sharing and Adherence, Clinical Outcomes, Health Care Utilization, and Costs: A Systematic Literature Review | Journal of Managed Care & Specialty Pharmacy, www.jmcp.org/doi/10.18553/jmcp.2022.21270. Accessed 2 Mar. 2026.