Taming the Rate Beast: Open Enrollment Strategies for Lower Mid-Market Construction and Manufacturing 🚧đźŹ
Open Enrollment (OE) is a critical annual event, and for lower mid-market companies in the construction and manufacturing sectors, it’s often a high-stakes balancing act. You need a competitive benefits package to attract and retain your workforce, but you are also highly sensitive to the ever-increasing costs—especially healthcare.
This year, don’t just react to rate increases—get proactive by exploring cost pooling techniques and strategic OE management.
The Unique HR Benefits Challenges in Your Industry
Construction and manufacturing companies face distinct employee benefits issues that impact plan costs and employee needs:
Higher Risk, Higher Claims: The nature of the work—physical labor, machinery, and potential for injury—often results in a higher frequency of Workers’ Compensation and medical claims. This drives up your medical loss ratio and subsequently, your renewal premiums.
Talent Scarcity: Both sectors are battling a competitive labor market. A robust benefits package, including quality health, dental, and disability insurance, is essential for recruitment and retention.
The ACA Mandate Squeeze: As a mid-market company (often defined as having 50–1,000 employees), you are typically considered an Applicable Large Employer (ALE) under the Affordable Care Act (ACA). You’re large enough to be mandated to offer Minimum Essential Coverage (MEC) but often too small to self-insure and absorb large claims without significant financial impact.
Navigating Open Enrollment: Key Considerations
For a successful, cost-effective Open Enrollment, HR teams should focus on these strategies:
1. Prioritize Physical and Financial Health Benefits
Disability Insurance: Strong Short-Term and Long-Term Disability plans are crucial. These physically demanding roles mean employees value coverage that protects their income following an injury or illness.
Voluntary Benefits: Offer a robust suite of voluntary benefits like Accident Insurance and Critical Illness Insurance. These plans pay a lump sum upon diagnosis or injury, helping employees cover high deductibles and out-of-pocket costs, which can increase satisfaction even if you’ve had to raise medical plan deductibles.
Wellness Programs: Implement wellness initiatives focused on injury prevention and general health. Healthier workers reduce claims, which is a direct long-term cost-mitigation strategy.
2. Optimize Communication for Your Workforce
Multi-Channel Approach: Use a mix of digital (mobile app, email) and traditional methods (posters, breakroom flyers, in-person meetings).
Focus on Cost and Value: Employees want to know, “How much is this going to cost me, and what value am I getting?” Clearly break down the employer/employee cost-share percentage and use simple examples to explain plan changes.
Utilize a Digital Platform: Ditch the paper. Use an online enrollment system to streamline the process, reduce HR administration errors, and provide a single source of truth for benefit documents.
The Power of the Pool: Mitigating Rate Increases
When your renewal rates come in too high, you have options beyond simply passing the cost to employees. Cost pooling is a powerful technique for mid-market companies to gain the financial leverage of a much larger organization.
What is Cost Pooling (or Multi-Employer Pooling)?
Cost pooling involves your company joining a plan with other, non-related businesses, creating a much larger and more diverse group of insured individuals. This is often achieved through:
Association Health Plans (AHPs): These plans allow small businesses and mid-market companies within a specific industry or region to band together. The larger pool size means the risk of a few high-cost claims is spread across many employers, leading to more stable and lower premiums.
Professional Employer Organization (PEO) Master Plans: By joining a PEO, your employees are co-employed, allowing you to access their large-group health plan. This provides an immediate, massive pooling effect, significantly lowering administrative burden and often offering superior rates and plan designs.
Pooled Employer Plans (PEPs) for Retirement: While not a health strategy, PEPs are a new cost pooling model for 401(k) and retirement plans. They pool administrative and fiduciary services, dramatically lowering management fees and compliance risk—a significant win for HR teams.
Why Level Funded Plans Or Pooling Work for Some Lower Mid-Market Firms
Level or Self Funding is another cost effective option. Blair Stientjes, President of TotalBenefitsCA states,“Level funded plans offer transparency that many fully insured, small group plans can’t provide. While plan designs and coverages are very similar to fully insured plans, level funded plans are much more competitively priced. And if there is underutilization, then there is a possibility for a rebate back to the employer.”.
This is a great option for some employers with as few as 50 employees. This delivery of health insurance has become very popular over the last few years as a tool to combat higher premium costs.
Another option is pooling plans. The primary advantage of pooling is smoothing out volatility. For a company with 50–300 employees, one or two catastrophic claims in a year can lead to a 20–30% rate increase at renewal.
By entering a pool with hundreds or thousands of other members, those same few high-cost claims have a negligible impact on the overall rate, giving you:
Lower Administrative Costs: Fees are negotiated on behalf of the massive pool.
Increased Buying Power: You can access the networks and pricing tiers reserved for Fortune 500 companies.
Predictable Renewals: Rates are based on the aggregate experience of the large pool, making them far more stable year-over-year
Take Action: A Proactive OE Checklist
Start Q3 Budget Analysis
Don’t wait for renewal rates — model “what-if” scenarios for cost-share percentages and new plan designs.
Evaluate PEO/AHP Options
Consult a broker specializing in pooled options to compare rates against your current fully insured plan.
Review Ancillary Benefits
Ensure Disability, Accident, and Life Insurance align with your high-risk workplace needs.
Simplify Communication
Draft easy-to-understand materials (videos, short guides) to explain value and changes clearly.
Mandate Digital Enrollment
Transition to an HRIS or benefits platform to reduce errors and collect compliance data efficiently.
Ready to Get Ahead of Open Enrollment?
Don’t wait for rate shocks. Let’s discuss how proactive planning, data modeling, and pooled strategies can stabilize costs and improve your benefits ROI.
