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Why is my group's health plan renewal rate so high?


What factors affect your renewal?

It's the time of year when many small business owners check their inbox to find that the group health insurance renewal has arrived from the insurance carrier.  

For many groups this year, the news has not been pleasant. Annual family premiums for employer-sponsored health insurance rose five percent to $19,616 in 2018, according to the Kaiser Family Foundation Employer Health Benefits Survey.

What's most frustrating for many fully-insured small business owners is that they have no way of understanding the reasoning behind their company's increase, because the health insurance companies do not disclose claims information to fully-insured groups.

So what's behind the rise in premiums for employer coverage and what factors determine your company's annual renewal?

Generally speaking, most health insurance companies determine your small group's rate increase, or decrease if you're lucky, based on four main factors:
  1. Risk Factor:  Health insurers assigns a risk factor to every group based upon your employees medical history and prior claims experience.  

  2. Medical Trend:  The medical trend is based upon the rising cost of healthcare that the insurer is experiencing for other small groups in your "pool" that share the same plan design as your group. Regardless of the health of your group, your premiums are affected by this rate.

  3. Healthcare Reform:  Due to the necessary plan design changes that insurers have made to comply with reform over the last several years, such as no cost share for preventive care and no lifetime maximums, most insurers have built in a rate increase of around 1 or 2% based upon the expected added cost.

  4. Demographics:  The insurer weights the demographics of your group as though your company were to be written as a new group based upon your employee census and corporate location. 

As fully-insured rates continue to rise at unsustainable levels for small and mid-sized businesses, more employers are expressing interest in self-funded plans, which allow more claims transparency. Carriers and third-party vendors are also seeing an opportunity in the market, and are working with groups smaller than they traditionally would have.

Bernard Benefits has more than a decade of experience helping groups of all sizes explore their funding options. To speak with a Bernard Benefits representative and learn more, click below.

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