Amid Soaring Costs, Health Benefits Brokers Seek New Strategies

Affordability challenges are transforming the health benefits market, requiring brokers, carriers, and employers to make difficult decisions.

In 2000, healthcare spending comprised roughly 13% of total U.S. Gross Domestic Product (GDP). Today, that figure is up to 18%. By 2033, it’s projected to reach 20%, which is $1 out of every $5 spent attributed to healthcare.

As costs climb and market conditions tighten, brokers can no longer rely on rate shopping alone to find the right benefits package for employers and plan sponsors at renewal. Instead, brokers will need to identify and implement new strategies to help reduce the cost curve and manage employees’ out-of-pocket exposure on behalf of their clients. Doing so will require year-long communication and education.

A Perfect Storm of Cost Pressures

Inflationary trends and multiple industry-specific factors, including provider reimbursements and rising utilization, are creating material market changes and severe cost shifts.

Prescription drug costs represent the highest estimated increases for plans this year at 11%. Widespread use of GLP-1 therapies, infusions, and biologics are key drivers. So are specialty drugs for serious conditions like cancer or hemophilia. These medications comprise just 2% of prescriptions but account for nearly 50% of a health plan’s total drug spend.

Simultaneously, million-dollar-plus claims are increasing in frequency and severity, heavily impacting the commercial market. Add site-of-care variances and expenses associated with technology and health innovation to the equation, and 2026 could bring the highest annual renewal projections in more than a decade. We’re seeing carriers applying medical cost trends of 10% to 12% in formula renewals, with pricing models that bake in buffers to offset volatility and high-cost claims.

Increased Scrutiny Raises the Risks

Growing regulatory and legislative pressures impacting Pharmacy Benefit Manager (PBM) relationships and fiduciary responsibilities are hot topics this year.

In February, Congress enacted legislation to expand PBM transparency obligations and provide group health plans with more insight into PBM compensation and pricing practices. As part of this effort, Congress clarified the scope of ERISA’s § 408(b)(2)(B) compensation disclosure rule by eliminating prior references to specific categories such as “brokerage services” or “consulting,” and instead applying disclosure requirements to any service provider that furnishes services falling within the statute’s enumerated list. This clarification is designed to ensure that PBMs are subject to the same fiduciary-level compensation disclosure obligations as brokers.

At the same time, ERISA-focused class action lawsuits have sparked greater awareness about fiduciary duties, and a handful of cases have moved through the court system. It remains to be seen exactly how these emerging lawsuits will play out.

Four Ways to Bend the Cost Curve

As healthcare expenses and regulatory risks heighten, employers and plan sponsors will rely on their broker to identify the most comprehensive coverage at the lowest possible cost. That’s why it’s critical for brokers to proactively inform and educate their clients about emerging market conditions and seek creative solutions.

Evaluating the full funding spectrum. Rate shopping within one funding model leaves value on the table. Brokers should run a complete market check across the continuum (i.e., fully insured, level-funded, self-funded, group captive, PEO/MEWA, ICHRA). Each carries a distinct risk-and-reward profile that can reshape an employer’s cost trajectory. For example, level-funded health plans mimic a fully insured feel while capturing some of the upsides of self-funding and giving employers visibility into costs and utilization. Many national carriers now quote 50% to 100% surplus retention. The right structure depends on group size, risk tolerance, and claims profile.

Recommending cost-containment programs. Dialysis management solutions, which move dialysis out of the PPO network, reprice claims, and integrate case management to help delay chronic kidney disease progression, can help plans reduce costs by up to 90% or more of billed charges. Site-of-care optimization programs can redirect appropriate infusions from hospitals to lower-cost outpatient facilities or in-home services, with estimated savings of 25% to 65%.

Investing in AI. Brokers who embrace AI will operate with more accuracy, speed, and insight. Many industry professionals recommend using AI to streamline underwriting, which will bring tangible benefits in more volatile and tougher-to-predict markets. AI has also shown promise in streamlining RFP processes and workflows to manage the flurry of renewal activity each fall.

Treating ancillary renewals strategically. In a market where rate tells only part of the story, ancillary renewals warrant a disciplined approach. Brokers can use renewals to consult their clients on leave and multi-state compliance exposure and overall benefit strategy alignment with current employee needs.

Make Benefits Strategy an Ongoing Conversation

Regardless of market conditions, carriers, brokers, partners, and plan administrators share a responsibility to maintain appropriate, high-quality benefits coverage options for individuals and families.

Brokers that assist employers in navigating cost and compliance complexities and work with niche specialists to implement targeted cost-containment strategies year-round will uphold this promise to their clients while addressing the affordability crisis head on.

Dumeny is president of Amwins Benefits. She can be reached at riva.dumeny@amwins.com.

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