Three Points of Your Renewal Aren't Medical Trend

A 40-person services company I work with got their broker's first read on the January renewal last week. Fourteen percent. The broker called it "in line with market," which is true and also the least useful sentence anyone said on that call.

KFF pulled the actual filings on August 6. Across 295 small group insurers in all fifty states and D.C., the median proposed 2027 increase is 14%. A quarter of carriers came in at 10% or under, a quarter above 18%, and 59% landed in the ten-to-twenty band. So yes, in line with market.

Now look at what the same filings say about cost. Median medical trend, the underlying price of hospitalizations and physician care and drugs, is 10.8%.

Somebody has to pay for the groups that left

Fully insured small group covered roughly 17 million people in 2013. By 2024 it was 10 million, a 41% drop. Small businesses didn't stop offering coverage over those eleven years. Total small-firm coverage fell only 8%. They moved, mostly to level-funded arrangements, which went from 7% of small firms in 2019 to 37% by 2025.

Only healthy groups can make that move. Level funding requires underwriting, and a group with a bad claims history doesn't get the quote.

Carriers describe this in their own rate filings. One wrote that these products "pull small groups with favorable risk out of the merged market risk pool." That's an insurer explaining, in a public regulatory document, that its remaining customers cost more because the healthy ones left.

Part of your renewal is the price of your own claims. The rest is the price of everyone who was healthy enough to get quoted somewhere else.

It compounds, too. Each year the underwritable groups exit, the pool that stays gets more expensive, which sends the next tier of underwritable groups shopping. A single renewal reads as inflation. Five of them in a row is a structural spread.

Get quoted, if only to learn which group you are

Level funding splits your fixed premium into a claims fund, a stop-loss premium, and an admin fee. You pay a maximum monthly rate all year. Claims run under it, you get money back.

Read those refund terms before you celebrate. Take 28 enrolled at a max funding rate of $32,500 a month, so $390,000 a year. Actual claims plus fees come in at $325,000. Underrun is $65,000, and a typical contract returns 50% to 80% of it, arriving six to twelve months after the plan year closes.

You financed $65,000 for about eighteen months to collect maybe $39,000, and it lands in a fiscal year that has nothing to do with the claims that earned it. Worth doing. Not the number on the proposal.

The re-underwriting risk is the part nobody prices. Fully insured small group is guaranteed issue at a community rate. Level funded isn't. One member with a serious diagnosis and your next renewal reprices, or the carrier passes, and the pool you return to is the one your exit helped make expensive.

Ask your broker for a level-funded quote in the next two weeks even if you intend to stay put. The quote answers a question the renewal letter never will: whether you're the group paying the subsidy, or the group everyone else is paying it for.