Why midsize employers need a multi-year benefits strategy to control healthcare costs

Each year, midsize employers in the traditional fully insured model are told to brace for another double-digit renewal increase, with no options to get out of this cycle. 

Medical trend is outpacing both wage growth and inflation. The Wall Street Journal reports employer health insurance costs are projected to jump 9.5% in 2026, the sharpest increase in 15 years. 

Imagine a company with 150 employees is currently spending $2 million per year in fully insured healthcare insurance premiums. If the premiums increased at that 9.5% trend annually, that company would be paying more than $33 million over the next decade.

For any other $33 million line item in your budget you’d stop and ask: What can I do to lower this spend? How do I get more value for every dollar I’m spending? 

Addressing these questions requires moving beyond year-to-year renewals and adopting a multi-year benefits strategy to take control of healthcare costs and maximize the value of benefits for employees. 

Key Takeaways

1. 1. With traditional fully insured health plans, you spend more than if you were paying only for the actual cost of healthcare.
      

   2. Short-term fixes don’t address the real causes of rising costs. For example, cost-shifting to employees with higher deductibles or changing provider networks might be a short-term fix, but they don’t change the underlying drivers of healthcare spend.
      

   3. A multi-year employee benefits strategy with ParetoHealth eliminates risk volatility and is a path to reduce healthcare spend.

How annual renewals compound healthcare costs for midsize employers 

Healthcare costs quietly compound over time because every annual renewal becomes the new starting point for next year’s increase. 

That’s known as the stair-step effect, and it’s a silent budget killer for midsize employers: 

• • Each renewal locks in a higher baseline for future costs. 

• • Flexibility and predictability shrink year after year. 

• • Small annual increases quietly add up to major long-term expenses. 

Let’s look at how this plays out. 

In this example, a company with 150 employees is currently spending $2 million per year in fully insured healthcare insurance premiums. If the premiums increased at 9.5% trend annually, that company would be paying more than $33 million over the next decade.

Watch our Stop-Loss Simplified video to learn more about how compounding renewals drive traditional health insurance costs higher year after year.

Why shifting healthcare costs to employees increases long-term spend

Short-term fixes can’t control long-term costs because they only shift expenses from one year to the next without addressing what’s actually driving healthcare spend.  

Often, employers will consider raising employee deductibles to shift costs to employees. With higher out-of-pocket costs, employees may delay or avoid preventative care altogether.  

That often leads to more frequent emergency department visits, worsening chronic conditions, and more costly urgent care usage. All of which ultimately drive employer costs back up even higher. 

Unlike short-term fixes, a multi-year employee benefits strategy is a sustainable strategy to address increasing healthcare costs.

How ParetoHealth helps midsize employers build multi-year benefits strategies

Self-funding with a ParetoHealth captive helps midsize employers move beyond one-year renewals to build multi-year employee benefits strategies. 

With medical claims and pharmacy rebate transparency, employers can identify and address the root causes of high-dollar claims, and access curated programs from ParetoHealth’s Savings Engine to lower costs over time.  

The result is a sustainable approach to managing healthcare spend. And it all ties back to two simple but essential questions every midsize employer should be asking: 

How can I lower my overall healthcare spend as much as possible?
ParetoHealth allows you to operate at a lower fixed cost and align every dollar you spend with the true cost of care, so your budget goes further without compromising quality.

How do I get more value for every healthcare dollar I spend?
By providing full medical claims and pharmacy rebates transparency, actionable data, and access to proven strategies, ParetoHealth helps you address the root drivers of high-cost claims to build long-term financial stability. 

What is the ParetoHealth Savings Engine?

The ParetoHealth Savings Engine addresses the root causes of high-cost claims. Backed by data, analytics, and in-house clinical experts, it delivers curated programs and multi-year strategies that lower costs over time. Members using the Savings Engine typically see $325–$525 per employee per year in hard-dollar savings.

Why are more midsize employers are self-funding with a ParetoHealth captive?  

After years of cost-shifting and reactive renewals, forward-thinking employers are turning to self-funding with a ParetoHealth captive to build multi-year employee benefits strategies that reduce volatility, create stability, and lower overall healthcare spend. 

These are many of the benefits to self-funding with ParetoHealth: 

• • Lower fixed costs: Reduce admin and overhead. More dollars go to care, not insurance company profits.
  • Scale: Unlock Fortune 25-level negotiation power and protections that midsize employers can’t get alone.
  • Eliminate volatility: Pareto’s Risk Shield protects against large claims and premium spikes year after year.
  • Strategic levers to reduce spend: Use the Pareto Savings Engine with data-driven strategies to manage healthcare costs over time.  

With ParetoHealth, midsize employers aren’t just reducing healthcare spend. They’re investing in an enhanced employee benefits strategy that delivers more value year after year.

A multi-year claims-based study found that employers who moved from fully insured plans to Pareto reduced healthcare costs by 7.5% in the first year and by an additional 16.5% annually by year three.

Ready to take the next step?

Start building your multi-year employee benefits strategy with ParetoHealth. 

-> See how much your organization could save. Try our interactive savings calculator and discover the long-term financial impact of moving beyond traditional health insurance renewals.

Written by: Melissa McDonald, Director of Content Marketing

Sources 

• • The Wall Street Journal (2024). “Employer Health Insurance Costs Projected to Rise 9.5% in 2026, the Sharpest Increase in 15 Years.” 

Further Reading

• • ParetoHealth: How it Works