Medical Trend

Medical trend is the expected yearly rate of change in health care costs per person. It combines price increases, changes in how much care people use, shifts toward more expensive services, and new drugs and technology. Every renewal starts by applying trend to your past claims.

Also calledhealthcare cost trendtrend ratemedical cost trend

Updated October 18, 20262 min readWatch the 1:13 video

Why it matters at renewal

Trend is usually the largest single driver of a renewal increase, and one of the least questioned. Small differences in the assumption add up to large dollars, and most employers never see which number their carrier used.

For context, PwC projects a 9% medical cost trend for employer group plans in 2027 (Behind the Numbers 2027, June 2026). The 8% in the example below is illustrative.

Worked example

A group with 180 members, $600 PMPM in past claims, and 8% annual trend. Trend is applied from the midpoint of the claims period to the midpoint of the new plan year, often about 18 months, not 12.

Step	Value
Past claims PMPM	$600.00
Annual trend	8%
Projection period	18 months
Trend factor (1.08^1.5)	1.1224
Projected claims PMPM	$673.42
Projected vs. past claims	+12.2%
Added claims cost per year (2,160 member months)	+$158,587

One point matters. At 9% trend, projected claims rise to $682.80 PMPM. That one point adds about $20,000 a year in projected claims.

Read the transcript

Every health plan renewal starts with one number most employers never see: the trend assumption.

Medical trend is the expected yearly change in health care costs per person. Prices, how much care people use, and new drugs and treatments all roll into it.

Take a group of a hundred and eighty people, averaging six hundred dollars per member per month in claims. The carrier assumes eight percent trend.

But trend isn't applied for just twelve months. It runs from the middle of your past claims to the middle of your new plan year. Usually about eighteen months.

On your renewal, it's this one line. Eighteen months at eight percent is a factor of about one point one two. Six hundred dollars becomes six seventy-three.

Nudge trend to nine percent, and this group's projected claims go up about twenty thousand dollars a year. One point. Twenty thousand dollars.

So ask your carrier three things. What trend did you use for medical and for pharmacy? Over what period? And how does it compare to published surveys? Then check your own renewal at actuariallysound dot com.

Common misunderstandings

01

"Trend is just inflation."

It also includes changes in how much and what kind of care people use, so it usually runs well above general inflation.

02

"Projected claims up 12% means a 12% renewal."

Not usually. Your current premium was already priced ahead, so for a group whose claims came in as expected, the renewal rises by about one year of trend. Anything beyond that comes from claims experience, credibility, the carrier's fees, or plan changes.

03

"Trend is one number."

Pharmacy trend often runs higher than medical, driven by specialty drugs and GLP-1s. Ask for both.

Questions to ask your carrier or broker

What annual trend did you assume for medical, and what for pharmacy?
What projection period did you use, midpoint to midpoint?
How does your assumption compare to current published trend surveys?

Free tool

Is your renewal in line with trend?

Enter the current premium and the proposed increase. Two minutes, no claims data needed.

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