Dominant Carrier Raises Rate Increase Cap to 50%

Providence Benefits has served businesses and brokers across Alabama for more than nine years. The company was founded with a clear purpose: helping employers find more affordable ways to provide quality healthcare coverage.

That mission is personal for Providence Benefits owner Andy Martin, CLU, ChFC.

Before starting Providence Benefits, Andy spent years in the life insurance industry. His perspective changed after his personal assistant of 13 years passed away from cancer. Near the end of her life, she shared that she had delayed receiving care because she could not afford the costs associated with her employer's high-deductible health plan.

When Andy later learned about secondary medical coverage, commonly known as Major Medical GAP Insurance, he saw an opportunity to help employers address that problem. GAP coverage can help reduce the financial burden employees face when deductibles and other out-of-pocket costs continue to rise.

Healthcare Costs Continue to Climb

According to Key Benefit Administrators, one of the largest independently owned third party administrators in the United States, family health insurance premiums have increased 86% since 2010.

At the same time, average out of pocket healthcare costs have increased significantly. KBA reports an increase of 203% since 2010.

The result is a growing gap between healthcare costs and what many American families can realistically afford. During the same period, wage growth has not kept pace.

For employers, that pressure is becoming harder to ignore.

A Major Change for Alabama Employers

The dominant health insurance carrier in Alabama, which controls more than 90% of the state's market, has announced an important change for groups with renewal dates of October 1, 2026 and later.

Its maximum rate increase cap has increased from 25% to 50%.

That change matters to Providence Benefits because more than 95% of the Major Medical GAP plans we currently administer are paired with coverage from this carrier.

For employers already struggling with rising premiums, the possibility of even larger increases creates a serious challenge.

One employer we recently spoke with said the employee only premium for its health plan was approximately $500 per month before its July 1, 2025 renewal. After increases in both 2025 and 2026, that same rate is now approximately $790 per month.

The employer told us its current rates are becoming unsustainable.

The obvious question is: What happens if another large increase comes next year?

What Can Benefits Professionals Do?

Brokers and benefits professionals are going to play an increasingly important role in helping employers navigate these increases.

At Providence Benefits, we are currently focusing on three strategies designed to help employers control costs while continuing to offer meaningful healthcare benefits.

One of those strategies involves Cigna.

Providence Benefits is the only Alabama domiciled General Agency representing Cigna Healthcare in the state. At this time, Cigna continues to cap renewal increases at 20%.

There is no guarantee that this cap will remain in place indefinitely. However, in today's market, the difference between a 20% maximum increase and a potential 50% increase is worth considering.

For some groups, that additional rate stability could make Cigna an option worth exploring.

More Strategies Are Coming

Cigna is only one of the three strategies Providence Benefits is using to help brokers and employers address the rising cost of healthcare.

We will be sharing additional information about strategies two and three in upcoming articles.

In the meantime, if you would like to see whether Cigna could be a fit for one of your groups, contact Providence Benefits. Our quoting team, including Chris Harris, David Duffy and Matthew Martin, can help you review the options available.

Visit providencebenefits.com to learn more.

Healthcare affordability is not a problem any one carrier, broker or employer can solve alone. It will require benefits professionals to continue looking for smarter ways to control costs while protecting employees.

We look forward to sharing our next strategy with you soon.