Why it matters at renewal
If your group is experience-rated, your claims directly shape your renewal. Knowing each step of the calculation shows you where to push back.
Worked example
A full renewal build for the same 180-member group as the Medical Trend example, paying $700 PMPM today:
| Step | Value |
|---|---|
| Past claims PMPM | $600.00 |
| Trended (8%, 18 months) | $673.42 |
| Manual rate (claims portion) | $650.00 |
| Credibility (180 members, √(180 ÷ 1,000)) | 42.4% |
| Blended claims (42.4% × $673.42 + 57.6% × $650.00) | $659.93 |
| Required premium (÷ 85% target loss ratio) | $776.39 |
| Renewal vs. current $700 | +10.9% |
Each row is an assumption you can ask about.
Read the transcript
If your group is experience-rated, your renewal isn't a guess. It's built from your own claims, in six steps.
Start with past claims: six hundred dollars per member per month, for a group of a hundred and eighty. Trend them eighteen months at eight percent, and you get six seventy-three.
But the carrier doesn't rely on your claims alone. It has its own rate for a group like yours: six fifty. The weight your claims get is called credibility. At a hundred and eighty people, it's about forty-two percent.
Blend the two: six sixty. Divide by the eighty-five percent target loss ratio: seven seventy-six. Against today's seven hundred, that's ten point nine percent.
Here's the part most people miss. This group's claims ran about five percent high. At full weight, that would mean thirteen percent. At forty-two percent, it adds about two points.
So ask your carrier three things. Can we see the full build, step by step? What credibility did you give us? And what rate did you blend with? Find out more at actuariallysound dot com.
Common misunderstandings
Questions to ask your carrier or broker
- Can we see the full renewal build, step by step?
- What credibility did you assign us, and how was it calculated?
- What manual rate was used for the blend?