Obsessing Over Premiums Alone is Creating Hidden Risks for Employers

The real crisis in benefits for 2026 is not cost, but the loss of control, weakened compliance, and widespread misunderstanding that sit beneath it.

Employer-sponsored health insurance now exceeds $18,500 per employee, yet for organizations with fewer than 100 employees, the challenge runs deeper than rising premiums. Locked into fully insured plans with limited flexibility, many default to familiar responses at renewal, absorbing another increase or downgrading coverage in ways that strain employee trust. What often goes unaddressed are the quieter risks accumulating in the background: weak ERISA governance, poorly understood funding changes, and a persistent employee literacy gap that quietly drives total cost higher while increasing legal exposure and cultural friction, regardless of the sticker price.

We spoke with Andrew D. McNeil, Senior Benefits Advisor at Arrow Benefits Group, an employee benefits and human capital management advisory firm, whose perspective is shaped by years of working with employers navigating rising costs, compliance obligations, and employee expectations. A regular contributor on business strategy at The Press Democrat and co-host of BenefitsTV-The Podcast, McNeil has seen how easily benefits strategies slip into a renewal-driven routine. Relying on the annual renewal as the primary decision point does not address underlying risk. It leaves employers with limited control, overlooked compliance responsibilities, and employees who do not fully understand their benefits.

"We keep kicking the can down the road. It might save 10 percent this year, but the next year it becomes 15 percent, and you’ve taken on even more risk."

McNeil identifies compliance as one of the most overlooked risks in benefits strategy. In the rush to manage costs, core ERISA requirements are frequently missed, leaving employers exposed. That oversight reflects a broader pattern of short-term decision-making in inflexible markets, where new risks are added faster than old ones are resolved.

• Documentation matters: McNeil recalls a conversation with another broker whose client was undergoing a Department of Labor audit and was surprised when regulators rejected the carrier’s evidence of coverage as insufficient. "I had to explain that the ERISA plan document doesn’t come from the carrier," McNeil says. "It comes from the employer."

In trying to rein in costs, many employers end up taking on new risks they did not intend. For small and mid-sized companies in fully insured plans, the problem is structural. Deductibles and family premiums keep rising, but increases are driven by the carrier’s overall book of business, not by how a specific employer performs. With little control over outcomes, employers start looking for different funding options. When those moves are made without a clear understanding of the added responsibilities and liabilities, the result is often more exposure, not less, especially for smaller organizations.

• Clear costs, cloudy comprehension: That risk extends beyond plan design. Options like Individual Coverage Health Reimbursement Arrangements (ICHRA) can offer more predictability, but only when employee understanding is addressed. When communication falls short, the gap between employer investment and employee perception widens, turning a major expense into a source of frustration rather than value.

• Bronze medal backlash: When employers move from covering 100 percent of a Silver plan to partial coverage of a Bronze plan, backlash is often inevitable. "The problem is rarely the change itself, but how it's communicated," notes McNeil. "Without clear explanation of what the shift means for employees, organizations virtually guarantee confusion, frustration, and negative reaction."

Breaking out of the annual renewal cycle means moving beyond the once-a-year exercise of absorbing increases and moving on. McNeil encourages leaders to step back and look at the structure of their benefits strategy, not just the next pricing decision. Equally important, he says, is treating employee communication as a continuous responsibility rather than a single event. When organizations focus only on getting through the next renewal, rising premiums become a cost of inertia. Ongoing, clear communication helps employees understand the value of the investment and reduces friction over time.

• Blow up your benefits: "Look at options that blow up what you're currently doing, like a captive or level-funded arrangement. Completely revamp how you communicate with employees. If you want people to value the money you're spending, you have to make communicating that value a priority," he says.

• The boredom barrier: "Benefits are boring," McNeil says, noting that employees often tune out during formal meetings and only engage when they need the information later. That is why he points to high-visibility approaches used by companies like Zappos, where benefits information appears throughout the workplace. The objective, he says, is to keep benefits consistently visible rather than confined to a single annual presentation.

In the end, the effectiveness of a benefits strategy hinges on comprehension. Without a clear understanding of coverage, tradeoffs, and costs, employees are left to fill in the gaps themselves. The result is predictable: disengagement, skepticism, and resistance to change. Closing that gap requires consistent education and visibility, not a single annual event.

"That fundamental literacy is a huge problem. You so often meet with someone who confuses their copay with their deductible. It’s really about driving home a true understanding of the plan they have."