Reading a renewal letter

A renewal letter announces a number and rarely explains it. Most of what looks like one increase is actually three or four separate movements, and they are not equally negotiable.

Here is how to take it apart.

The components

Trend. The carrier’s expectation of medical cost inflation across its whole book. Applies to everyone, moves annually, and is not negotiable by you. It is the largest single component in most renewals.

Ageing. Your workforce is a year older than it was, and rates are age-banded. If nobody joined or left, this alone moves the number. Not negotiable, entirely predictable, and worth knowing so you are not surprised by it every year.

Census change. Who joined and who left, and their ages. A group that hired several younger people can see this offset part of the trend. A group that lost them sees the opposite.

Your own experience, where it applies. In the small-group market rates are largely community-rated, so individual claims experience has limited direct effect. Where a group is level-funded, experience matters considerably more — a different conversation with a different answer.

Plan and benefit changes. Sometimes the carrier has changed the plan itself. A renewal that keeps the same premium while raising the deductible is an increase, and it is easy to read past.

The first thing to check

Is it the same plan?

Compare the deductible, the out-of-pocket maximum, the copay structure and the network name against what you have now. Carriers do adjust plans at renewal, and a like-for-like comparison is the only comparison worth making.

If the plan has changed, the headline percentage is not describing what you think it is describing.

The second thing to check

Is it the whole programme, or just medical?

Dental, vision, life and disability renew on their own dates unless somebody has aligned them. A medical renewal that looks manageable can sit alongside an ancillary increase nobody has looked at in four years.

What is negotiable, and what is not

Not negotiable: trend, ageing, the community rate itself.

Sometimes negotiable: carriers occasionally revisit a renewal when a group is credibly being marketed, particularly for groups they want to keep. It is not a reliable tactic and it is not a substitute for actually going to market.

Fully within your control: plan design. The contribution split, the deductible, network breadth, whether you offer one plan or two, and the effective date. These usually move the number more than switching carriers does, and with less disruption.

Available but blunt: changing carriers. Worth doing when the gap is real. Disruptive when it is marginal, and genuinely bad for anyone mid-treatment.

The question to ask the carrier

“How much of this is trend, how much is ageing, and how much is census change?”

Carriers can generally break this down and often will if asked. The answer tells you whether you are looking at a market-wide movement you cannot avoid or something specific to your group that is worth investigating.

What to do next

Note the effective date and count back ninety days. If that date has passed, you are working with less room than you should have; act on what is left and fix the calendar for next year.

Do not accept it by silence. Most plans renew automatically. Doing nothing is a decision to take next year’s version of the plan without looking at it.

Get it marketed, or decide deliberately not to. Either is legitimate. What is not legitimate is finding out in February that nobody went and looked.

If you would like a second pair of eyes on one, send it over. A renewal review costs nothing and there is no broker-of-record letter until you have seen the numbers.