Steve Rauschert, partner at Lakeshore Employee Benefits in Michigan, joins the Benefits Brief to discuss the cost pressures facing employers as they plan for 2027. Drawing on his work with small and mid-sized employers across several industries, he explains why he is preparing clients for continued rate increases, considering more alternative health plan options, and paying close attention to how employees respond to benefits changes.
Steve Rauschert’s Background
- Typically advises employers with 40–350 full-time, benefits-eligible employees.
- Works across physician services, manufacturing, construction, and professional services rather than specializing in one industry.
- At the time of the interview, most clients had made their 2027 benefits decisions, and his team's work had shifted toward preparing employee communications and benefit materials.
- Serves on advisory boards for two of Michigan's largest insurance carriers, informing his view of upcoming rate pressures.
Key Takeaways
- Prepare for sustained cost increases. Based on what he says carrier leaders are projecting, annual healthcare rate increases of 8–10% may become the new norm, making longer-term benefits and budgeting plans important.
- Consider more plan alternatives. Approaches previously passed over, including self-funded/direct-primary-care arrangements and reference-based pricing (RBP) plans, are now receiving consideration.
- More choice creates more complexity. For a small employer with 20 people enrolled, the number of carrier and plan spreadsheets his team presents has grown from three five years ago to eight today. Explaining contractual differences is becoming more important.
- Don't underestimate employee reactions. HR and finance can have competing concerns, and some leaders may underestimate how benefit changes affect employees. In his team's experience, many employees don't understand the benefits they already have.
- Cost containment leads 2027 decisions. Historically high renewal increases are driving the focus on finding valuable coverage within available budgets. He did not rank the other three factors individually.
Recurring Questions
1. What’s one thing you’re telling every client this year, regardless of their size and situation?
Prepare for sustained healthcare cost increases and develop longer-term plans for how benefits fit the business and its workforce. According to carrier leadership he works with, annual rate increases of 8–10% could become the new norm.
Plan beyond one renewal
- The current trajectory of healthcare costs is unsustainable, making it important to prepare for continued pressure.
- Available strategies vary by employer size. Some clients have more options for creative approaches than others.
- Long-term planning should consider benefits spending, employee retention, and broader business goals together.
Make benefits costs predictable as the business grows
- Benefits planning includes reviewing a client's financial position and hiring plans, not just its next renewal.
- One client expected to add 40 employees, increasing its workforce by roughly one-third.
- Consistent employer contributions across three health plans would make the cost of adding each employee easier to budget.
2. What have you changed your mind about since last enrollment season?
The biggest change is a greater willingness to consider unfamiliar benefits solutions. Instead of dismissing LinkedIn outreach from providers offering different approaches, options that previously might not have been considered are now on the table.
Reconsider options previously passed over
- Nearly every potential approach is worth reviewing, including self-funded/direct-primary-care co-contracting arrangements and RBP plans.
- There is also competitive pressure to present alternative solutions before another advisor does.
Explain the growing range of choices
- For an example employer with 20 people enrolled in its health plan, the team previously reviewed three carrier spreadsheets. Today, that example involves eight.
- The wider selection includes national carriers that have entered Michigan and additional small-employer funding arrangements.
- More choices have complicated the process, even for smaller employers. Clients need education about what they're buying and the major contractual differences among options.
3. What do you think most benefit leaders are underestimating right now?
Some benefits leaders underestimate how employees will perceive and react to plan changes. HR is often concerned about employee reactions, while finance is focused on keeping benefits spending within budget. Finding a balance between the two is a recurring challenge.
Balance the budget with employee impact
- HR teams may resist major plan changes because they could create disruption or dissatisfaction among employees.
- Finance leaders may respond to budget pressure by considering higher employee contributions.
- Some senior leaders may underestimate the effect of employee dissatisfaction, including the cost of hiring and training replacements.
Explain the value of the plan clearly
- In his team's experience, roughly 90% of employees they speak with at client groups do not know what benefits they have.
- Changes can be received better when the plan and its value are explained simply from the employee's perspective.
- Rather than centering an open enrollment presentation on a deductible increasing from $1,500 to $2,000 or $2,500, the emphasis is on helping employees understand the plan offerings.
4. For 2027, what’s driving benefits decisions most? Is it cost containment, employee retention, employee trust and experience, or compliance and risk?
Cost containment is the leading factor across his clients for 2027. The other three factors were not ranked individually.
Cost containment
- Historically high renewal increases are making 2027 as difficult as, or worse than, 2026 in his experience.
- Employers are focused on finding benefits they consider valuable within their available budgets.
- Looking ahead, the expectation is that increases may become less steep, not that healthcare costs will flatten.
- Pharmacy is the largest cost driver he is seeing.
- Other pressures discussed include healthcare use among older members, high-cost claims, more frequent claims, and GLP-1 medications.
Compliance and risk
- Not separately ranked or discussed as a 2027 decision driver.
Employee trust and experience
- Not separately ranked. Elsewhere, the interview emphasizes how well employees understand their benefits and react to changes.
Employee retention
- Not separately ranked. Retention is part of longer-term planning, particularly where dissatisfaction could lead to hiring and training costs.
Impactful Quotes
“Unfortunately the new norm is gonna be eight to ten percent rate increases every single year is what we're being told by senior leadership.”
“At this point in time we have to turn over every single rock, whether it's a self funded direct to primary care co contracting plan that we otherwise wouldn't use, RBP pricing plans.”
“And then you have the finance piece, the CFOs, that are worried about the dollars. And somehow they gotta meet in the middle, right? Like, no, we can't make that big change because that's gonna do the cause all this chaos. And you gotta remember it costs us money to hire people and train them.”
“We find that ninety percent of the employees that we speak with at our groups, they have no idea what they have.”
About the Benefits Brief
The Benefits Brief is an ongoing interview series from Bereave that asks benefits leaders, brokers, and employee benefits experts the same questions about what they are seeing today and what they expect ahead. As more experts participate, their answers create a growing view of changing priorities, areas of agreement and disagreement, and where employee benefits may be heading next.
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