What Smart CFOs Do Before Renewal Season Arrives

Most CFOs, unsurprisingly, think about benefits in the same way they do any other significant line item. That is to say, keeping the cost under control, avoiding surprises, and making sure the numbers don’t rise too dramatically from year to year. 

That’s a reasonable starting point, but it’s also an incomplete one from our experience. The CFOs who get better outcomes from their benefits programs have figured out that the framing matters as much as the math. Here’s what the CFOs who handle this well are doing differently.

The Framing Problem Most CFOs Inherit

Benefits are usually presented to a CFO as a cost problem that starts with a number and works backward to a decision: “The premiums went up; what do we do about it?” 

The issue with that framing is that it puts the CFO in a reactive position from the start. They’re evaluating options they didn’t help design, against a timeline they didn’t set, with data they’re seeing for the first time. The best outcome available in that scenario is a somewhat less bad number than the carrier originally proposed.

The CFOs who get better outcomes reframe the problem. They don’t wait to see the number before engaging with the strategy. They build the strategy before the number arrives, which changes both what options are available and what leverage exists when the negotiation starts.

When CFOs Drive the Data Conversation

The most important thing a CFO can do in September is ask to see their plan's utilization data and actually engage with what it shows (composition of cost vs. aggregate cost). They’re asking things like: 

• Where are claims concentrated?
• Are employees using preventive care at reasonable rates, or are they deferring routine visits in ways that tend to produce larger claims downstream?
• Is emergency room utilization higher than it should be for a population of the company's size and demographics?
• Are there specific benefits driving disproportionate cost that would be worth addressing in plan design? For certain companies, this data sits in reports that the broker has access to and the CFO has never seen. But it doesn’t tend to come up because nobody on either side has made it a regular part of the conversation. 

Hint: what you should be doing. Ask for this data in September, review it with your broker, and build your renewal strategy around what it shows is working. This is a fundamentally stronger position than one who sees the carrier’s renewal number in October and reacts to it. 

This Modeling Conversation Changes the Outcome

The second thing smart CFOs do before renewal season arrives is model alternatives. Not the alternatives the carrier will eventually present, but alternatives built around the company's own data and priorities.

• What does the cost picture look like under two or three different plan design scenarios?
• What is the real financial difference between a higher-deductible plan with better employer HSA contributions and the current plan, accounting for likely utilization?
• What does the contribution strategy look like if the company wants to shift more or less cost to employees, and what are the downstream effects of that decision on benefits engagement and talent retention? These aren’t complicated questions. But answering them correctly takes time and data, both of which are available in September and compressed in October. The CFOs who model these scenarios before the renewal number arrives are in a position to evaluate the carrier's proposal against something concrete. The ones who see the number first are evaluating it against nothing, which tends to produce worse decisions.

Leverage in a Renewal Negotiation

The final thing that separates the CFOs who handle renewal well from the ones who don't is an understanding of where leverage actually comes from.

Leverage in a renewal negotiation doesn’t come from pushing back emotionally on a number you don't like. It comes from preparation. From knowing what your claims data shows and being able to present it in a way that supports a different conclusion than the carrier's renewal number implies. From having already modeled alternatives that give you a real option if the carrier's initial number is not defensible. From having enough time to go to market if the conversation does not produce a reasonable outcome.

All of that leverage is built before the renewal number arrives. None of it can be built after.

What to Do Right Now 

The most useful thing a CFO can do before October arrives is get specific about what they actually know going into renewal. If you can answer the above questions, plus ones like what the utilization data shows or what’s your broker’s read on the renewal outlook, you’re in a different position than most. And that difference tends to show up positively in the renewal outcome. 

The work itself isn’t complicated, but the timing makes it hard. Use this as both a guide and motivation to turn your strategy from reactionary to proactive. 

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Brian Allen | President, evco | Managing benefits for 36,000+ lives since 2005