What's actually inside your health insurance renewal (and what your broker probably didn't show you).
Your renewal letter arrived with a number. It says your premium is going up 8%, 12%, or 18%. But that number hides a lot. Your broker probably didn't show you what's actually driving the increase, how the carrier decides your rate, or what happens to the profits when your group stays healthy. Here's what a renewal letter actually contains - and what you need to ask about.
What your renewal letter actually shows
A fully insured renewal letter from your carrier contains a few core pieces:
- Your old premium (or rate per employee) - what you're paying now.
- Your new premium (or rate) - what they want you to pay next year.
- A percentage increase - the gap between the two, usually expressed as a single number.
- Justification language - a paragraph explaining why the increase exists, usually referencing medical trend, aging, utilization, or pool experience.
That's almost all a renewal letter contains. It's designed to look factual and final. In practice, it's the carrier's proposal. You're supposed to look at the number, maybe call your broker to complain, and accept it or shop. That's the whole interaction.
What your renewal letter hides
The renewal letter doesn't show you the claims data behind the increase. Here's what's usually missing:
- Your actual claims experience. You don't see what your group actually spent on medical and pharmacy claims. You're told your pool increased due to "trend" or "utilization," but you don't see the numbers.
- How your group performed versus your pool. Your group might have claims 10% below the pool average, but if the pool's experience was bad, you're charged the pool rate anyway. You're never shown the comparison.
- How much the carrier is keeping. The increase is presented as "medical cost growth," but it also includes carrier profit margin, administrative loadings, and rounding. You're not shown how much of the increase is actual claims trend versus margin.
- Whether you could switch to a different pool or rating method. Most fully insured groups are in a standard community pool. A healthy group might qualify for a smaller, healthier pool with a better rate, but the carrier and broker have no incentive to point that out.
- What surplus is being retained. On a fully insured plan, if your group is healthy and claims run under premium, the carrier keeps the surplus. You're not told whether a good year happened or where those profits went.
How community rating actually works
Understanding your renewal requires understanding how you're being rated in the first place.
On a fully insured health plan, you're in a community-rated pool. That pool is made up of all the employers in your region (New Jersey, or sometimes a smaller geographic slice) who are on the same plan design with the same carrier. The carrier combines the claims experience of everyone in that pool and charges each group the same rate.
This means your rate has almost nothing to do with your group's actual health. A 40-person law firm with no claims and a 40-person construction company with high workplace injuries both get charged the same community rate. The law firm is subsidizing the construction company, in effect.
For healthy groups, this is a bad deal. The carrier keeps the savings from a good year as part of the pool's overall profit. For sick groups, it's protection - they're not charged individually based on their own bad experience.
What questions to ask about your renewal
Most employers don't ask because most brokers don't volunteer this information. Here's what to push on:
1. Show me the claims data behind this increase.
Ask your broker or the carrier directly: What were our actual claims for the last 12 months? What were the claims for the pool? How does the increase reflect the difference? You should get two numbers - your group's claims and the pool's claims. If your group was healthier than the pool, that matters.
2. Is the increase driven by our group's claims, or pool drift?
A 12% increase might be 6% actual medical trend in the pool, plus 6% because the pool composition got sicker. Those are different problems. One is mostly outside your control; the other means you could potentially move to a different pool where you'd rank higher and get a better rate.
3. Are we in the healthiest pool available?
Most carriers tier their pools by health profile. A healthy group might qualify to move from the standard pool to a "preferred employer" or "wellness" pool with better claims experience and a lower rate. Your broker should have modeled this automatically; ask if they did.
4. What happens to the surplus when claims are good?
If you came in under budget last year, where did those savings go? On a fully insured plan, the carrier keeps it. If it's a significant amount, that's money that could have gone to your company or employees.
How level-funded changes the picture
A level-funded plan answers every question your renewal hides.
On a level-funded plan, you see your group's actual claims data every month. You're not in a community pool - your rate is based on your own experience. You pay a fixed monthly amount that covers a claims fund, administration, and stop-loss insurance. If your group's claims run under the projected amount, you get the surplus back at the end of the year instead of the carrier keeping it.
A healthy New Jersey group on a fully insured plan with an 8-10% annual increase is often paying 2-4% more than it should, based on its actual experience. That's the upside captured by the community pool and carrier profit. On a level-funded plan, a healthy group typically sees a smaller increase or even a refund, because the math is based on actual claims, not pools.
For employers of 25-250 employees - your typical New Jersey law firm, accounting practice, dental group, or clean manufacturer - level-funded is often the right structure to compare. It's not always cheaper, but it's transparent. You see the data, you know your risk ceiling, and if your group is healthy, you keep the upside.
Learn more about how level-funded works and whether it makes sense for your group in our full guide to level-funded plans.
The honest limitation of renewal letters
Here's the uncomfortable truth: renewal letters are designed not to be fully transparent. That's not illegal or uncommon. A carrier has no reason to show you data that might prompt you to leave. A broker who's been with your group for years might not want to stir up a difficult conversation about switching.
This is why asking for claims data, pool tier, and surplus information matters. Most of the time, you'll get it if you push. Sometimes, your broker will tell you honestly that the data doesn't support a switch. That's useful information too.
If you want to know whether your renewal is actually a good deal - whether the increase is reasonable for your group, whether a different funding model would work better - you need the data. A no-cost analysis using your own renewal, census, and claims history is the only way to know for sure.
Common questions about renewal letters
Look for the old premium, the new premium, and ask for the claims data behind the increase. You should see your group's actual claims experience, what the carrier is charging for that, and what's being added for carrier profit. Most brokers only show you the number - ask specifically for the claims data.
On a fully insured plan, your carrier pools your group with similar employers in your region. If the pool has higher claims, everyone pays more. You're charged based on the pool experience, not just your own group's claims. That's why a healthy group can pay the same increase as a sick pool.
On a fully insured plan, it stays with the carrier as profit. On a level-funded plan, if your actual claims run under what you funded, the unused claims money can come back to you as a surplus refund. That's the biggest difference for a healthy group.
Ask for the claims data behind the increase. Ask if your group's experience is better or worse than your peer pool. Ask whether your group qualifies for a healthier pool tier. Ask what happens to the surplus when claims come in under budget. Most brokers don't volunteer this without being asked.
On level-funded, you see your own claims data and get a fixed monthly cost. If your group is healthy and claims run under projection, you get a refund. Stop-loss caps your risk if claims spike. You're no longer in a community pool - your rate is based on your actual experience, not a pool's.
See what your renewal actually means for your group.
We'll pull your claims data, compare your group's experience to your pool, and show you what a level-funded plan would cost. No obligation. Just numbers, straight.
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