How do underwriters actually price our renewal?

When I was an underwriter at Cigna, I had a budget to invest in rates, and I had to decide which groups were worth spending it on. That is the part most employers never hear. Your renewal is not a number the carrier calculates. It is a number the carrier decides.

For a large, underwritten group, the formula looks like this:

Projected claims. Your recent claims, adjusted for trend, which is medical and pharmacy inflation.
Credibility. How much weight your own experience gets versus a manual rate for a group of your size, age, and industry. A 500 life group might be fully credible. A 75 life group is only partly credible.
Pooling. Large claims above a set amount get pulled out and replaced with a pooling charge, so one cancer case does not single-handedly double your rates.
Retention. Admin, taxes, commissions, risk charge, and profit margin.

Every one of those has a range. Trend can be set a point or two higher or lower. Credibility can be argued. The pooling point can move. The manual rate can be adjusted for "risk factors." That is where the underwriter's discretion lives.

The way you win that discretion is with a clean submission: a complete census, at least two years of monthly claims and enrollment, large claimant detail with current status (resolved, ongoing, or terminated), current plan design and rates, and a short narrative on anything unusual. Underwriters price uncertainty high. The less they have to guess, the less they charge you for guessing.

Questions to ask

What trend, credibility, and pooling level did the carrier use in our renewal?
Which large claimants were included, and are any of them no longer active?
What did our submission to the market actually include?

When should we start working on our health plan renewal?

Five months or more before the effective date. Requests for quotes typically go out three to four months before renewal for fully insured groups and four to five months out for self-funded and captive groups, because stop loss quotes and lasers depend on current large claim detail. Most renewals fail because they start 60 days out.

Why did our renewal go up when our claims were good?

If you are fully insured, very little of your renewal is based on your own claims. It is driven by a large, generally unhealthy risk pool, and when your claims come in under what the carrier priced, the carrier keeps the difference. Changing how the plan is funded, even with the same carrier and plan, is often what fixes it.

Fully insured, level funded, self-funded, or captive. Which is right for us?

It depends on who you want holding the risk. Fully insured is the simplest and least transparent. Level funding is the usual first step for a healthy group and is most common under 200 employees. Self-funding gives you all the data and keeps the surplus, in exchange for volatility. A group captive gives self-funded employers the same economics with less volatility by sharing a middle layer of risk with peers.