Start with the gap above trend
Medical trend is the rise in health care costs per person, and surveys put it at about 8% to 11% for next year. It's the one piece of a renewal you can check from the outside. If your increase sits inside that range, trend may be most of it.
Anything above the range is the part to diagnose. On a $1.5 million plan, a +14% renewal is $210,000. Even at the top of the trend range, at least $45,000 of that is something else. The Renewal Checker does this math for your numbers.
A quick diagnosis
| What you see | Likely driver |
|---|---|
| Increase inside 8% to 11% | Mostly trend |
| Claims ran well above what the premium was priced for | Your claims |
| A few months with very high claims | Large claims |
| Older workforce or more family coverage | Age and enrollment |
| Same deductible and copays for several years | Plan design |
| Good claims, but still above trend | Fees or catch-up |
Most renewals have more than one driver. Use the table to decide where to look first, then check each one below.
The six drivers and how to spot them
1. Medical trend
Prices rise, people use more care, and new drugs and treatments cost more. Carriers apply trend from the middle of your claims period to the middle of the new plan year, often 18 months or more, so it can add more than one year's worth.
2. Your own claims
If your group is large enough to be experience-rated, a bad claims year raises your renewal. How much depends on credibility, the weight the carrier gives your claims. Small groups (usually under 50 employees) are priced on the carrier's whole pool, so this driver doesn't apply to them.
3. Large claims
A few members with very high costs, such as cancer treatment, a premature birth or a transplant, can drive a big share of a group's claims. Many carriers pool claims above a set amount per person, so you pay a pooling fee instead of the full cost.
4. Age and enrollment changes
Every employee is a year older at renewal, and older members cost more. Shifts from single to family coverage, or a change in headcount, also move the rate. For small groups, aging plus the carrier's filed rate change is most of the renewal.
5. Plan design
Richer benefits cost more, but so does standing still. When the deductible stays the same, trend lands on the plan's share. A member with $10,000 of claims and a $2,000 deductible costs the plan $8,000. If claims rise 8% to $10,800, the plan pays $8,800, a 10% increase.
6. Carrier fees, margin and catch-up
Part of every premium pays for administration, taxes, risk and profit. If those costs rose, or last year's renewal was negotiated down and the carrier is making up the difference, the increase can run above trend even after a good year.
What to do next
Check the gap with the Renewal Checker. Then send your broker the seven questions to ask before accepting a renewal. If your claims went down and the renewal still went up, here's why.
If the explanation still doesn't add up, get an independent second opinion.