Your Business Has Goals. Does Your Benefits Plan?

Business plan vs. health plan. Is there a difference? There shouldn't be.

The renewal letters are landing, and this year they come with an explanation. Aon projects employer health care costs to rise 9.5% in 2027 before any plan changes, the fourth straight year of increases near double digits. [1]

The explanations are mostly right. Utilization, specialty drugs, provider prices. I have written about the same causes here.

The prescriptions are where it goes wrong. The plan changes come down to three moves: shift more cost to employees, add a point solution, or change the carrier or the broker. Each one moves a dollar from one pocket to another. None of them changes what the plan buys, or why the plan exists.

Part of the reason is that all three are aimed at health insurance. The cost lives in healthcare: what care costs and how much gets used. Insurance is the wrapper, and you can renegotiate a wrapper every year without touching what is inside it. The employers who reach the inside decided first how much risk they would carry to get there. That is a later issue.

This one is about the step before any of it.

Every company, at any size, runs on a business plan, a hiring strategy, and an accounting system that can peel back a layer when someone asks. A business without a plan is a hobby. A hire without a job description is a favor. A ledger that cannot be opened is a problem waiting for an auditor.

In 2026, the health plan is the one line of the business that runs without any of the three. No written goal. No stated population it is built to attract and keep. And when the CFO asks what the dollars did, the answer is a renewal letter.

So the plan gets judged on the only number it ever produces: this year's increase. That is how three moves that solve nothing became standard. They are the only moves that change the one number anyone is looking at.

There is a benefit in the same building that gets none of this treatment. Both the company and the employee put money into the 401(k). Markets go up and down. Nobody enjoys a down year. And yet both parties see value in it regardless of the year, and nobody questions the dollars.

The reason is not that retirement is simpler than healthcare. It is that every dollar is visible. The employee gets a statement and owns a balance. The employer sees the match it paid. In participant-directed 401(k) plans, plan and investment fees are disclosed, and charges to participant accounts are reported quarterly, by rule. [2] It is a security blanket because you can see inside it.

Now put the health plan next to it. Same two contributors. The employer gets a renewal letter. The employee gets a payroll deduction. Neither one gets a statement.

Your 401(k) tells you what it is worth. Your health plan tells you what it costs.

That gap is not a law of nature. Since late 2021, a parallel compensation-disclosure requirement has applied to brokers and consultants serving ERISA-covered group health plans. [3] The requirement exists. Almost nobody runs their health plan as though it does.

This is not a cost to be saved. It is an investment both parties make every pay period. The question is whether anyone can see what it is buying.

"Control the controllable" gets said a lot at renewal. It deserves a definition.

You do not control the unit price of an MRI, the carrier's trend assumption, a drug manufacturer's list price, or the market's increase. The three standard moves are all attempts to work that column, which is why they have to be repeated every year.

You do control the goal the plan serves, who it is built for, the design, the contribution strategy (Issue 03), the funding mechanism, the contracts and fees (Issue 04), the data you require from every vendor, and the calendar. This issue is about the first two, because without them the rest are guesses.

One more thing belongs in that column: your risk tolerance. Two employers in the same industry, same size, same renewal, can make opposite decisions and both be right. One decides that large-company benefits inside a boutique firm is how it wins the talent the large companies are chasing, and funds the plan accordingly. Another takes the harder decision this renewal so the next three do not each force one. Pain now or pain later is a real choice. Neither employer is buying "cheaper." Each is buying something specific, and can say what it is.

Having no goal is not a third option. It is pain later, with no one accountable for it.

Every role you hire for has a job description and expectations. You expect value from the work, and you review it. When someone is not delivering against the description, you replace them with a person more aligned with where the business is going. Sometimes that person costs more. You accept it because the fit is worth more than the difference.

Apply the same principle to the benefits you offer. Write down what the plan is hired to do, for whom, measured how, and reviewed when. Then review it the way you review a hire.

The sharp edge: you do not replace an employee for costing more. You replace one who is not delivering against the job description. Most health plans have never been given one. So the only review they get is the renewal percentage, and the only verdict available is renew or replace.

Changing carriers without a job description is replacing an employee without one. You get a different person in the same undefined seat.

To write the description, work backwards from the workforce.

Start with representative roles at the lowest-paid and highest-paid levels of the company. What does each role need from total rewards to join and stay? Wages, PTO, flexibility, plan design, options, and contribution strategy work together. The health plan is one lever among several and only makes sense next to the others.

Answer the role question at both ends and the boundaries come into focus. The lowest-paid eligible class sets your affordability floor: the employee-only contribution has to work across that class, and for applicable large employers federal rules put a number on what affordable means. [4] At the other end, ask whether the same plan supports the roles that are hardest to recruit and retain.

With those boundaries set, the budget is a math problem. Without them, it is a negotiation with a renewal letter.

The return does not show up as a line item. It shows up as everything inside the company rowing in the same direction: fewer meetings about the plan, less recruiting and retention stress, less administration, and leadership attention back on the business. It shows up as no surprises, because the plan and every vendor attached to it get valued against a written goal on a schedule, not against last year's number in a panic.

Some years the belt still tightens. The difference is that an aligned plan can be adjusted against its goal. An undefined one can only be cut.

1. What is the plan's job description? What it is hired to do, for whom, measured how, reviewed when. One paragraph, written before the renewal meeting, signed by the people who own the business plan. If it cannot be written, that is the finding.

2. Who is it for? Name the workforce roles and eligible classes the plan is meant to support. Do the design, the options, and the contribution strategy work across those groups? Which other total-rewards levers are doing the work the plan is being asked to do?

3. Who is at the table? The business plan and the hiring strategy have owners. Does the health plan have the same people in the room, or only the ones who process the renewal? The stakeholders decide whether the plan gets a job description or a percentage.

4. Can it peel back a layer? Claims by category, fees by recipient, the Schedule A, the expenses outside the quoted maximum. If the carrier does not provide that, write it down. That is part of the valuation.

The two-column version of these questions is on the Resources page: Before You Set the Plan. Business goals on the left, the benefit goals they imply on the right. A blank cell on the right is not a failure. It is the next conversation.

The renewal letter is coming either way. This year, read it the way you would read a performance review with no job description attached. It can tell you what the year cost. It cannot tell you whether anything was accomplished, because nobody wrote down what the plan was hired to do.

Write that down before the next one arrives. Then the letter has something to answer to.

Have a renewal in front of you where the recommended fix came with no stated business goal attached? Describe the decision through Submit a case.

Do not send PHI, claimant details, identifying information, or confidential employer files. Submissions are considered for possible analysis and publication. Nothing is published without permission.

The cases that teach something are worth breaking down in the open. The names and private details are not.

Know an owner, CFO, or anyone at the table setting next year's plan? Forward this issue. The decision starts with the business, not the quote.

See you in two weeks.

Scott

P.S. Next issue: The Time Your Benefits Cost. Prior authorizations, post-service denials, and the hours a plan quietly bills to the people who use it.

1. Aon, U.S. Employer Health Care Costs Continue Multi-Year Climb, Projected to Rise 9.5% in 2027 (August 20, 2026; status-quo trend before plan design changes; annual growth from 3.7% in 2022 to 8.8% in 2026). link

2. U.S. Department of Labor, participant-level fee disclosure for participant-directed individual account plans (29 CFR 2550.404a-5) and periodic benefit statements (ERISA section 105). link

3. U.S. Department of Labor, Field Assistance Bulletin 2021-03, service provider compensation disclosure for group health plans under ERISA section 408(b)(2) as amended by the Consolidated Appropriations Act, 2021. link

4. Internal Revenue Service, Rev. Proc. 2026-26, 2027 indexing adjustment for the employer shared responsibility affordability percentage. link

General information, not insurance, legal, or tax advice.

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