How you lower a renewal depends on your group size. A small group can’t be priced on its claims, so a good claims year won’t win a lower rate. The savings come from fixing an outdated employee list, choosing a cheaper plan, changing your contribution, or taking another carrier’s lower quote. A large group can also challenge the renewal with its own claims data.
In most states, part of a small group’s increase usually comes from employees moving into older age bands. Switching carriers changes the base rate, but not the effect of employees getting older.
A fully insured large group can ask the carrier for its claims data. A single large or one-time claim built into next year’s projection is one of the first things to question.
Start at least 120 days before your renewal date, so claims data, competing quotes, and plan changes are done before open enrollment.
A renewal arrives as one number: how much your premiums will rise next plan year. That number combines the carrier’s own rate change with changes in who your plan covers. What you can do about it depends mostly on whether your company is a small group or a large group.
Why This Matters
Picture a 30-person company whose renewal comes in 12 percent higher. The broker’s advice is to sign it or raise the deductible.
Neither answer says how much of the 12 percent is the carrier’s rate change and how much is employees getting a year older. That split matters, because a 30-person group can’t negotiate its rate. Another carrier’s quote can beat the carrier’s rate change, but the effect of employees getting older follows the group to any carrier.
So the first question is simple: which part of this increase can we actually avoid? To find out, you need specific numbers from your broker and carrier. Our renewal request list spells out which ones.
Featured Checklist
The Health Insurance Renewal Request List
What to ask your broker and carrier for before you sign, with a place to record each answer, split by group size.
Why Do Group Health Insurance Premiums Go Up at Renewal?
Every increase has two parts. The first is the carrier’s rate change, based on its claims data and what it expects medical and prescription costs to do next year. The second is your census: employees getting older, new hires, departures, and dependents added or dropped. The carrier can also change the plan itself at renewal, such as its network, copays, or deductible, so check what changed before you compare numbers.
Small groups. Under the Affordable Care Act, small group premiums generally can’t be based on your group’s health or claims. In most states, age is one of the few factors carriers can use, which is why employees getting a year older can raise the premium.
Large groups. Large group premiums can be based partly on the group’s own claims. That means the renewal rests on assumptions you can ask about.
The cutoff between the two is 50 employees in most states. Some states use 100, so check your state’s definition.
How Can a Small Business Lower Its Health Insurance Renewal?
Start by checking what drove the increase. Ask your broker to split the renewal into the carrier’s rate change and your census changes, and confirm the census is current. If it still lists people who have left, ask the carrier to re-rate the renewal. Carriers in the same state use the same age rules, so the percentage increase from employees getting older follows you to any carrier.
Then look at these five options:
Pick a different plan. A higher deductible lowers the premium but means employees pay more when they use care. A narrower provider network generally lowers the premium too, but limits which doctors employees can see.
Add a lower-premium choice. A high-deductible plan with a health savings account, offered next to your current plan, gives employees a lower-premium option without taking anything away. You can also pair a higher deductible with an HRA that covers part of the deductible.
Change how you contribute. A percentage contribution rises with every increase. A fixed dollar amount caps your cost, and employees pay any increase above it. Check the carrier’s minimum contribution and participation rules before you change anything.
Get quotes from other carriers. Ask your broker to quote comparable plans, and check that each plan’s provider network includes your employees’ doctors. With 25 or fewer full-time equivalent employees and low average wages, ask whether you qualify for the federal small business health care tax credit, which requires buying through your state’s small business exchange.
Consider a PEO. A professional employer organization handles payroll and HR administration and can offer health coverage. Ask how its plan is priced and what happens to coverage if you leave.
Two bigger changes. A level-funded plan is self-funded with stop-loss insurance and is priced partly on your group’s own claims. That can lower cost after a year with low claims and raise it after a year with high claims. Some states don’t allow level funding for small groups, and others limit how it’s structured, so ask whether it’s available in yours. If it doesn’t work out, you can return to a fully insured small group plan. Read the risks of self-funding first. An individual coverage HRA replaces the group plan with a fixed allowance employees use to buy their own coverage. Your cost becomes the allowance you set, but employees lose the shared plan.
How Do Larger Employers Negotiate a Health Insurance Renewal?
A fully insured large group renewal is a proposal. Four requests let you test it:
Your claims data. Ask for monthly premium, claims, and enrollment for the past 12 months, plus your loss ratio, which is claims divided by premium. Privacy rules let the carrier share this in summary form, with names removed.
Large and one-time claims. Ask where your pooling point sits, meaning the dollar amount above which a claim is charged to the carrier’s wider pool instead of your group. Ask whether a one-time claim was built into next year’s projection.
The assumptions. Ask what cost trend the carrier used, how much weight it gave your claims, and what it added for administration and profit.
Competing quotes. Other carriers need your claims data to quote, so request it early. Working with a consultant who shops and negotiates your renewal matters most here, because quotes only help if they arrive before your decision date.
Plan and contribution changes work for large groups too. If you have 50 or more full-time employees, counting full-time equivalents, check any contribution change against the ACA employer mandate rules.
When Should You Start Preparing for a Health Insurance Renewal?
Start at least 120 days before your renewal date. Claims data, quotes, and plan changes each take weeks, and your decisions need to be final before open enrollment, when employees receive each plan’s Summary of Benefits and Coverage.
120 days out. Agree internally on a budget and on what you’re willing to trade, such as a higher deductible or more cost variability. Ask your broker to get the renewal as early as the carrier will release it. Large groups should request claims data now.
When the renewal arrives. Get the split between the rate change and the census change. Divide your total annual premium by the number of enrolled employees, and ask your broker how that compares with employers your size in your area. A small increase on an expensive plan can still leave you overpaying.
Before open enrollment. Compare quotes and plan options, settle contributions, and sign the renewal.
Separate the carrier’s rate change from your own census change, and your options get clearer. Small groups work with the census, plan choice, contributions, and competing quotes. Large groups add the claims data and assumptions behind the renewal.
If you’d like a second look at your renewal, Schedule a Brief Review or call (206) 625-1800. If you’d rather start with your own team, download The Health Insurance Renewal Request List below and begin 120 days before your renewal date.
Featured Checklist
The Health Insurance Renewal Request List
What to ask your broker and carrier for before you sign, with a place to record each answer, split by group size.
A fully insured small group can’t negotiate the rate itself. Small group rates can’t be based on your claims, so there’s no group-specific number for the carrier to adjust. What you can change is the census the renewal is priced on, the plan, your contribution, and the carrier.
No. Federal law defines a small group as an employer with 1 to 50 employees, but it lets each state raise that cutoff to 100. Most states use 50, and a few use 100. That number matters because it decides which pricing rules apply to your group. Under the cutoff, a fully insured plan’s rate can’t be based on your group’s own claims. Above it, it can. Check your state’s definition, or ask your broker which one applies to you.
Group size is based on your average number of employees in the previous calendar year, counted the way your state requires. Once you’re past the cutoff, the carrier can price your group partly on its own claims. Your state’s rules set when that switch takes effect.
U.S. Government Publishing Office, Electronic Code of Federal Regulations, 45 CFR 147.102, Fair Health Insurance Premiums
U.S. Government Publishing Office, Electronic Code of Federal Regulations, 45 CFR 147.200, Summary of Benefits and Coverage and Uniform Glossary U.S. Government Publishing Office, Electronic Code of Federal Regulations, 45 CFR 164.504, Uses and Disclosures: Organizational Requirements
Office of the Law Revision Counsel, 42 U.S.C. 18024, Related Definition
Office of the Law Revision Counsel, 26 U.S.C. 4980H, Shared Responsibility for Employers Regarding Health Coverage
Important Disclosures
First Hill Trust Company is a Washington State-chartered trust company. Investment advisory services are provided by BAC Capital Advisors, an SEC-registered investment adviser and a wholly owned subsidiary of First Hill Trust Company. Registration does not imply a certain level of skill or training. This article is educational. Neither First Hill Trust Company nor BAC Capital Advisors is acting as ERISA counsel or tax counsel to any plan or plan sponsor, and nothing here replaces advice from qualified counsel about your own plan.
Accuracy and currency. Statutory provisions and regulatory descriptions in this article were checked against the cited primary sources as of the date of publication, but First Hill Trust Company and BAC Capital Advisors make no representation or warranty as to the accuracy, completeness, or timeliness of the information, and accept no liability for actions taken in reliance on it. Regulations and guidance change. Confirm current requirements with qualified counsel.
Educational purpose only. Provided by First Hill Trust Company for general informational and educational purposes only. It is not legal, tax, accounting, investment, or fiduciary advice, does not constitute a recommendation regarding any plan, investment, strategy, or course of action, and does not consider any recipient’s specific circumstances. Consult your own qualified advisors before acting.
No offer, agreement, or commitment. Nothing in this material constitutes an offer, solicitation, agreement, or commitment to provide any particular service or to assume any particular responsibility. Descriptions of what a trustee, administrator, adviser, committee, employer, or other party “may” or “can” do are illustrative of how such arrangements commonly work and do not describe the terms of any specific engagement. The actual services provided, the allocation of responsibilities, the scope of any delegation, and the duties of any party are governed solely by the applicable plan documents, trust agreement, advisory agreement, and written service agreements. In the event of any inconsistency, those documents control.
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