If you’re preparing for January renewals, October can feel like the moment of truth. With renewal information arriving in the fall and analysts anticipating a 9% increase in medical expenses, many employers may see a renewal proposal that comes in higher than expected.
When that happens, the good news is that you do have options. If you need a “break glass” strategy to help manage costs while continuing to support employees, here are three approaches worth considering.
1. Medical expense reimbursement plan (MERP)
A medical expense reimbursement plan, or MERP, is an employer-funded benefit that reimburses employees for eligible out-of-pocket medical expenses such as deductibles, copays, and coinsurance. MERPs can help lower employees’ healthcare costs while giving employers greater flexibility and control over benefit spending.
For employers facing steep renewal increases, a MERP can be a useful way to preserve competitive benefit value without absorbing the full impact of rising medical costs. Because the employer sets the reimbursement design, it can be tailored to meet budget goals while still providing meaningful support to employees.
2. Reference-based pricing (RBP)
Reference-based pricing, or RBP, is a self-funded health plan strategy that reimburses providers based on a set benchmark — typically a percentage of Medicare rates — rather than negotiated PPO rates. This approach can reduce healthcare costs and improve price transparency.
RBP can be a powerful cost-management tool when renewal pressure is especially high. However, it does require strong communication and member support. Because providers may bill employees for amounts above the plan’s reimbursement level, employers need to prepare for potential balance billing concerns and ensure employees understand how the model works.
3. Individual coverage health reimbursement arrangement (ICHRA)
An individual coverage health reimbursement arrangement, or ICHRA, is an employer-funded benefit that reimburses employees for individual health insurance premiums and other eligible medical expenses. It allows employers to provide tax-advantaged healthcare funding instead of offering a traditional group health plan.
ICHRAs can be especially effective for employers looking for more predictable budgeting and greater plan flexibility. It gives employees the ability to shop for coverage that fits their needs, while the employer maintains control over contribution levels. For organizations reevaluating the structure of their benefits program, an ICHRA may offer both cost relief and long-term sustainability.
The bottom line
A higher-than-expected renewal does not have to mean a full-scale benefits crisis. MERP, RBP, and ICHRA each offer a different path to managing costs, depending on your organization’s goals, workforce, and appetite for change.
If your renewal comes back higher than expected, these strategies can help you move quickly from reaction mode to action mode — and turn a pricing surprise into a chance to rethink your benefits strategy.
Reach out to an employee benefits advisor to learn how your organization can implement cost-management strategies.
