Is January 1 the Best Health Plan Renewal Date for Your Business?

January 30, 2024

Ask the most avid baseball fan you know – “What can you tell me about Jim Creighton?” – and you might be met with a blank stare.

So, why bring him up?

In 1858, Jim Creighton gained recognition as the first baseball pitcher to attempt to throw the ball past the batter instead of throwing the ball to the batter. Before that point, there was no concept of “balls and strikes,” and what is now a common-sense aspect of the game was not so common when the game first began.

What does that have to do with employee benefits?

A significant majority of employers renew their health plans on January 1 each year without stopping to consider if it is the best option.

Let’s dive into the topic of selecting a plan anniversary: considerations, pros and cons, and the process for changing to a date that better aligns with your natural business cycles.

Why January 1 in the first place?

Don’t get me wrong, there are advantages to renewing your plan on January 1. Many activities converge at the start of the year, and these considerations can make for a clean process:

• Most plans offer a “calendar year accrual,” meaning deductible accumulators reset to $0
• FSA and HSA limits change and reset each year on January 1
• Corporate budgeting and employee household budgeting often occur at this time
• ACA marketplace open enrollment

This date works particularly well for very large employers. The law of large numbers provides predictability and stability to their plan and rate structure, and carrier changes are far less commonplace. As a result, the timeline for open enrollment can occur as early as October.

What are the drawbacks to a January 1 anniversary?

For middle-market and smaller employers, renewal decisions, open enrollment, and carrier changes are often pushed deeper into the year where they collide with the holidays and the carrier busy season. Carrier turnaround times are longer, and priority is given to the highest revenue clients and opportunities.

What are the advantages of an “off-peak” anniversary?

If 60% of US companies renew on January 1, 40% renew in the other 11 months combined. This will produce several downstream effects:

• Off-cycle clients get more attention and experience less duress
• Clients can coordinate Open Enrollment with a strategic season for their business
• Carriers and vendors often run promotions during the slow season to drive demand, which can provide cost-saving opportunities

What are the drawbacks to an “off-peak” anniversary?

Coordinating accumulators during a carrier transition is the most significant challenge to an off-peak renewal. With plan accumulators typically running on a calendar year basis, a carrier transition might mean that employees with significant out-of-pocket payments may need to coordinate their payment history with the new carrier to ensure they receive full credit under the new plan.

While this typically impacts a small number of participants, it is worth some added care and attention to ensure a smooth transition.

What should you do?

Your company size, industry-specific peaks and troughs, fiscal year, and program type can all impact our recommendation.

Jim Creighton’s groundbreaking ability to challenge the norms of baseball in 1858 inspires us to get curious about new approaches and strategies. We excel at finding winning solutions that benefit your company and your team members.

CCIG can act as an extension of your HR team, identifying optimal program structures, funding arrangements, and opportunities to improve cost and quality, ultimately ensuring your program functions in a way that is beneficial and financially successful.

This article is part of CCIG’s First Quarter 2024 Curious Corner: Insurance Market Insights newsletter.

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