Shopping for a group health insurance plan can be such an exhaustive process that the natural inclination is to stay with the same provider once the plan is in place. However, a company's group health plan is such an important cost factor--not to mention a key tool for recruiting and retaining employees--that just as much attention should go into periodically revisiting the plan as the company put into the original selection.

Companies can think of this as a group health plan's annual check-up. Chances are, the insurance provider will be raising rates annually anyway, so that is a good cue to revisit the plan. This helps keep the process competitive, which is vital because health care costs are rising faster than the general rate of inflation. Over the past 10 years, the cost of medical care has risen at an annual rate of 4.13 percent, compared to 2.59 percent for overall inflation. Insurance providers add an additional layer of cost, so staying vigilant is important.

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Subjecting a group health plan to an annual review keeps that plan current with a wide variety of factors which may affect insurance premiums. Some examples of variables which might affect those premiums are:

• Company size. Growth in the number of employees may make a company eligible for volume discounts. It can also allow a company to shift from a general risk pool to its own risk rating, which may be favorable in many cases
• Employee demographics. This comes into play once a company has its own individual risk rating, though demographics may also affect the decision to switch to such a rating. Workforces which are getting younger--which is often the case in larger companies, as the ratio of entry-level hires to experienced founders increases--are more attractive from an insurance standpoint and may be subject to lower premiums
• Location. Location can affect group health insurance premiums to a surprising extent. This may be partially because of risk factors peculiar to certain areas, and also because of the differing costs of receiving medical care from one community to the next. In any case, a company which has relocated or opened additional locations may find this impacts health insurance premiums
• Usage patterns. When a plan is initiated, certain assumptions about things like deductibles, types of coverage, and access to health care providers are made. Reviewing actual usage patterns is the best way to judge whether these assumptions are proving to be the most cost-effective choices for the company and its employees
• Competition among providers. Opening a group health plan up to periodic review simply keeps the process competitive. It makes sure the current provider is offering its best possible rate, and opens the door to the possibility that another firm might be the best choice. Changing a health plan can be disruptive, so when in doubt the default will be to stay with the same provider, but meaningful cost differences can make a little disruption worthwhile to the company and its employees

Small business health insurance plans may be especially prone to changes in the above factors, and costs are often an especially sensitive matter for smaller companies. Therefore, just as small children need frequent medical checkups, small business health insurance plans in particular should be subjected to regular re-examination.

Sources

Bureau of Labor Statistics

National Association for the Self Employed

Wisconsin Health Insurance Cost Rankings 2009 (PDF)