How to Choose the Right Health Insurance Funding Strategy Before Your Next Renewal
Your annual renewal is about more than next year's premium increase. The funding strategy you choose today can influence your healthcare costs for years to come.
Every year, employers preparing for their employee benefits renewal ask the same question:
"What's our renewal increase?"
It's a reasonable question—but it isn't the most important one.
The better question is:
"Are we on the right health insurance funding strategy?"
While renewal percentages often grab the headlines, your funding model has a much greater impact on your long-term healthcare costs, financial risk, and ability to manage future renewals.
WATCH: Why Your Funding Strategy Matters More Than Your Renewal Increase
What Is a Health Insurance Funding Strategy?
A health insurance funding strategy is the method your organization uses to pay for employee healthcare claims.
The most common employer funding models include:
Fully insured
Level-funded
MEWA (Multiple Employer Welfare Arrangement)
Each approach offers different advantages depending on your organization's size, cash flow, claims experience, and appetite for risk.
There is no universal "best" option—only the option that's best for your business.
Why Your Funding Strategy Matters
The funding platform you choose doesn't just affect this year's renewal.
It influences your healthcare cost trend year after year.
Across Caravus clients over the past 12 months, average renewal increases were:
Level-Funded: 20.14%
MEWA: 19.96%
Fully Insured: 14.78%
Self-Insured: 10.43%
These figures don't mean every employer should move to self-insured.
Instead, they reinforce an important point: Funding strategy matters.
Choosing the right platform can help slow long-term healthcare cost growth, while the wrong platform may lead to higher costs over time.
Think Beyond This Year's Renewal
Think about this in investing terms:
A difference of just a few percentage points in annual returns compounds significantly over time.
Healthcare costs behave similarly.
A funding strategy that consistently results in even slightly higher renewal increases can create dramatically different financial outcomes over five years.
That's why employers should evaluate funding decisions with a long-term perspective—not just next year's budget.
Questions Every Employer Should Ask During Renewal
Before renewing your health plan, consider these questions:
Is our current funding model still the right fit?
Have we outgrown our current strategy?
Would another funding arrangement provide better long-term stability?
Are we balancing cost savings with financial risk appropriately?
What will this decision mean three to five years from now?
These questions often uncover opportunities that negotiating renewal percentages alone cannot.
When Should Employers Evaluate Their Funding Strategy?
Ideally, employers should begin evaluating funding options 90 to 120 days before renewal.
For January 1 renewals, that means starting conversations in August or September.
Beginning early allows time to:
Compare funding models
Review financial projections
Evaluate carrier options
Analyze claims data
Make informed strategic decisions before deadlines arrive
Waiting until late in the renewal cycle can limit your options.
Your renewal increase matters, but your funding strategy matters even more.
Choosing the right funding model can help create a more sustainable healthcare cost trajectory and position your organization for greater financial stability over time.
As your next renewal approaches, don't just ask how much your rates are increasing, ask whether your health plan is funded the right way.