Renewal Increase

A renewal increase is the change in premium a carrier proposes when a group health plan comes up for its annual renewal. It is built from medical trend (the general rise in healthcare costs), the group's own claims experience, changes in the group's age and size, and the carrier's margin.

Employer premiums have risen roughly 6 to 7 percent a year on average over the last decade, but the average hides the spread. I delivered plenty of 3 percent renewals and plenty of 30 percent ones, and the difference was almost always a handful of large claims. The renewal letter typically arrives 60 to 90 days before the plan year ends, which is the window for negotiating, shopping other carriers, changing plan design, or moving to a different funding arrangement. Carriers often open at a number they expect to negotiate down; an initial 18 percent that settles at 11 percent is a common pattern. Employers who arrive with their own claims analysis and a competing quote get better results than those who simply ask "can you do better?"

The takeaway: start the renewal process 120 days out, not when the letter arrives. Ask for the claims detail, get a second quote, and decide what plan changes you'd accept before you sit down with the carrier.