In the Houston market right now, a renewal increase of about 8–12% is fairly normal, especially with Blue Cross. Increases of 20%, 30%, or 50% and up are outside the norm. But a high number doesn't mean you have to accept it, and a normal one doesn't mean you shouldn't look. What matters is why the number moved and whether anyone worked it down before it reached you.
A renewal letter usually shows up with a number and very little explanation. This post walks through how to find out what's behind it, which levers can change it, and what to ask before you sign. (For a broader look at whether your rates are fair, see How to Know If You're Getting a Good Deal on Group Health Insurance.)
What Actually Drives a Renewal Increase?
Most renewals move for some mix of four reasons. Knowing which one is behind yours tells you what you can do about it.
Your group's claims
This is the big one for most small groups. The carrier compares what it collected in premiums with what it paid out in claims. It also has administrative costs, so a group whose claims roughly equal its premiums is still losing the carrier money. That group can expect a steep increase, or even a non-renewal.
Chris reads claims in two tiers:• Tier 1 is everyday claims: office visits, specialists, prescriptions.
• Tier 2 is the big claims: surgeries, major treatments, anything that cost the plan a lot.
"The claims data is going to tell us a story," Chris says. Then comes the question that matters most: will those big claims continue next year? Is the person behind them still employed, or did they leave or retire? "If they had cancer, is it now in remission and they've done all the work they needed to do?"
A one-time surgery that's behind you is a very different renewal story from ongoing treatment that will carry into the next plan year.
The market
Medical and pharmacy costs rise every year across the industry. Even a group with clean claims usually sees some increase. That's the baseline part of the 8–12%.
Your group's makeup
Age is one of the biggest factors in what a group costs to insure. If your team got older, or a few younger employees left, your rates can rise even when claims were fine.
The carrier itself
Sometimes the increase has nothing to do with you. Carriers reprice whole books of business, and a carrier leaving a market may raise everyone's renewal on the way out. That's exactly what happened when Memorial Hermann Health Plan announced it was leaving the Houston market.
Which Levers Can Actually Change the Number?
Your claims data decides which levers you get. "It's going to give us either more options or fewer options," Chris says.
If your claims are good
You have leverage, because carriers will compete for a healthy group.
Shop the market. Send the renewal and claims data to other carriers, and to more than one product type where it makes sense: fully insured and level funded.
Use medical questionnaires. Individual medical questionnaires give underwriters more data. For a healthy group, that usually opens up more carriers and better rates.
Go back to your current carrier. Strong claims data is also an argument for a better renewal from the carrier you already have. You don't always have to switch to save.
If your claims are bad
The options narrow. Some carriers may decline to quote at all. "Maybe we don't have many options," Chris says, "and we got to renew as is, or go with one of the fully insured carriers."
Even then, it's worth checking whether the big claims will continue. If they won't, that's a case to take back to the carrier.
Plan Design & Funding
Two more levers apply either way:
Plan design. A higher deductible or a different network can bring the premium down. The trade-off is what employees pay when they use the plan, so don't push a cheap premium so far that nobody can afford to use it.
Funding structure. Fully insured and level-funded plans price risk differently. A group that's been fully insured for years may find a level-funded option costs significantly less. MIG's rule: a new group should always shop both.
What Should Your Broker Do Before You See the Number?
A good broker doesn't just pass the renewal along. By the time it reaches you, they should already have pulled the claims data, figured out what's driving the increase, and started shopping.
When clients assume a big increase means they should just accept it, Chris's answer is simple: "No, we don't want to just accept it." His process:
Find out why. Look at the claims data. Is the increase driven by one-time claims, or ongoing ones?
Check whether it will continue. If the big claims came from an episode that's over, or from someone who has retired or left, next year's risk looks different from this year's.
Explain it and push back. Take that story back to the current carrier. "We can explain it, and go back and maybe get better quotes, even from the same company."
Reshop it. Get competing quotes either way.
"We just don't want to give up," Chris says.
An example: when the carrier is the problem
Chris shares an example of what this looks like. When Memorial Hermann Health Plan announced it was leaving the Houston market, it sent high renewals across the board. One of his clients got one, even though the group's claims were in great shape.
So MIG shopped the group with a different level-funded carrier and went back with the claims data. "I said, hey, this is what's going on. Look at this claims data. This claims data is absolutely wonderful," Chris recalls. "We actually went back, fought it, and got some really great renewals."
“The lesson: You just need to have an agent that’s on the ball, looking at the information, and has time to really shop your rates.”
What Are the Red Flags in a Renewal Conversation?
Watch for these when your broker walks you through the renewal:
They can't explain the increase in plain terms. "Rates went up" isn't an explanation. You should hear whether it's claims, the market, your group's makeup, or the carrier.
There's no claims data. If your broker hasn't requested tier 1 and tier 2 claims, nobody knows whether the big claims will continue.
There are no alternative quotes. One renewal and one recommendation isn't a market shop. Neither is a couple of quotes. You should see several carriers, including the ones that didn't come in competitive.
"That's just what happened this year." A shrug with no specifics usually means nobody looked.
The renewal shows up with a deadline days away. Carriers typically send renewals 85 to 90 days before the effective date. If you're seeing it for the first time weeks later, the time to shop has already been spent.
For warning signs that you've been overpaying for a while, see the red flags in How to Know If You're Getting a Good Deal on Group Health Insurance.
What Should You Do With Your Renewal?
If you're the owner: ask questions before you sign
Before you sign off on a renewal, ask your broker five questions:
What's driving this increase: claims, the market, our group's makeup or the carrier?
What does our tier 1 and tier 2 claims data show, and will the big claims continue next year?
Which carriers did you shop, and what did each one quote?
Did you go back to our current carrier with the claims data?
What would change if we adjusted the plan design or my contribution?
If your broker can't answer most of these, the renewal hasn't really been worked yet.
If you're in HR: make the case to a cost-focused CEO
A CEO focused on cost may want to auto-renew to avoid the hassle, or switch carriers every year to chase the lowest price. Chris's advice is to frame it as a balance between two costs:
The cost increase of renewing as-is.
The disruption of switching. "The employees don't like paying more money, but they also don't like having to find a new doctor that's in network," Chris says. Moving from Blue Cross Blue Shield to UnitedHealthcare or a smaller carrier can mean exactly that.
The case to make: shop the market every year so you know what's out there, then switch only when the savings outweigh the disruption. A disruption report helps here. It shows how many of your employees' current doctors and hospitals are in each new network, so the trade-off has a real number on both sides.
If switching every year would be too disruptive, Chris suggests a middle path: "Maybe we change carriers every three years rather than every year." You still capture savings from competition without asking employees to change doctors constantly.
A High Number Isn't Always a Bad Deal
And a low number isn't always a good one. What matters is whether someone actually worked the number down before it reached you: pulled the claims, told the story to the carrier, shopped the market, and brought you real options.
Not sure your broker is doing that? Score them with our Broker Evaluation Scorecard. [Get the scorecard]
Or request a competitive market analysis, and we'll show you what your group could get by shopping the market.
Frequently Asked Questions
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In the Houston market right now, about 8–12% is fairly normal, especially with Blue Cross. Increases of 20% or more are outside the norm and worth a close look.
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Usually because of some mix of your group's claims, rising medical and pharmacy costs, changes in your group's ages, or the carrier repricing or leaving a market. Your claims data shows which one matters most.
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No. Find out why it happened, check whether the big claims will continue, take that back to your current carrier, and shop the market. Strong claims data can win a better renewal even from the same carrier.
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Shop every year, but switch only when the savings outweigh the disruption of employees changing doctors. Some groups switch about every three years to balance the two.
