At Justworks, our goal is to not only to create a seamless health insurance renewals process for you — but a better and more human experience, too. We’re focused on giving you more context on control, so you have the information you need to make the best decisions for your business and on behalf of your team.
As part of that commitment, let’s take a closer look at what goes into determining your Large Group health insurance renewal rates each year. Check out this video explainer and continue reading below.
Video Resources:
- Building the Right Health Insurance Offering For Your Team
- Current Approaches to the Health Insurance Landscape with Justworks Customers
- Employee Health Insurance Evaluation Template (Survey)
Our Philosophy: Quality Coverage at a Fair Rate, Year Over Year
When it comes to health insurance, we aim to give you access to plans and experiences that strike a balance between quality and affordability. As a PEO, we can provide access to great plans at competitive rates. We also pair them with other health-related services and resources — so your team gets better value and outcomes from their overall benefits experience.
While affordability is important, our primary focus is providing you with quality coverage at a fair rate, year over year. Delivering on this begins with helping our insurance carriers price your health insurance as accurately as possible when you first join Justworks. To get you an accurate rate upfront, we require that you submit information about your organization’s demographics and past health insurance offerings. This helps to give the insurance companies we work with a holistic view of your team’s needs and allows them to formulate a stable baseline for your cost of coverage.
When we do so successfully, your annual renewal in subsequent plan years is more likely to reflect the average across the industry. Of course, the truth of the matter is that your rates will typically increase yearly, as health insurance costs have been increasing nationally over the last decade. It’s also important to note that because insurers base this initial cost on your company’s present demographics and past health insurance offerings, it is inherently imperfect. That is, it doesn’t capture exactly how your team may end up using their new coverage options once they’re on Justworks or account for headcount changes you may make thereafter.
What Factors Impact Large Group Renewal Rates?
As insurance companies learn from the claims incurred by a person or group, they annually adjust rates to better reflect their understanding of each group’s situation based on hundreds of data points. It’s this and a number of other factors that end up influencing your renewal rate.
In addition to what insurers can learn from a person or group’s claims in a given plan year, they also consider a range of macroeconomic factors annually. These are typically broader trends that affect the entire health insurance industry — like changes in prescription drug costs or government-mandated benefits — as well as needing to meet their own business’s performance goals.
At a high-level then, your renewal rate is reflective of both a range of macroeconomic factors and factors specific to your business (like plan utilization).
How Macroeconomic Factors Influence Large Group Rates
The underwriting process is complex and multifaceted. Insurance companies consider a number of macroeconomic factors when determining your rate for the upcoming plan year.
- Overall industry performance: Insurers consider the overall performance of the health insurance industry at-large, as well as the performance of their business, both of which will impact plan prices for the upcoming year.
- Geographic performance: Insurers also tend to benchmark their plan performance by geographic regions. How well their plans performed in your specific part of the country can also contribute to your plan prices for the upcoming year.
- Government-mandated benefits: Each year, federal and state governments can mandate that health insurers provide coverage for certain healthcare treatments or prescription drugs. These requirements, while ultimately beneficial for the general public, can lead to increased costs for health insurers that may be reflected in your rates. One well-known example of coverage requirements changing is the ACA’s dependent coverage mandate, which required all new health insurance plans to provide coverage for dependent children until the age of 26.
- Prescription drug and specialty treatment costs: Prescription drug costs, as well as the costs for specialty treatments for serious conditions (e.g. cancer, multiple sclerosis, or rheumatoid arthritis) have been consistently rising year-over-year.
- Overall inflation: Health insurers, like most businesses, factor overall inflation into their pricing changes each year.
Because insurers apply these macroeconomic factors to pricing generally and in a proprietary manner, Justworks is not able to “break down” or “back into” any one customer’s renewal rate.
How Factors Specific to Your Company Influence Rates
On top of these macroeconomic adjustments, insurance companies also consider factors specific to your business when determining your rate for the upcoming plan year.
- Plans offered: The types of plans you decide to offer will impact your rates over time. At the highest level, insurance carriers want to ensure that the amount of premium collected through each plan can sufficiently cover the claims incurred under the plan throughout the year. This is why, at Justworks, we encourage offering a variety of plans at different levels of richness and cost. Doing so can help create a more even distribution of the number of employees across plan options at enrollment.
- Enrollment: On top of the plans you offer, the people who actually enroll in them matters too. It’s important to remember that enrollment in the plans you offer often changes throughout the year. For example, you may have hired new employees or had other employees leave your organization. If not, your same employees may have also had Qualifying Life Events during the year, resulting in added or dropped dependents, etc. Your new rate is reflective of your currently enrolled members and their dependents.
- Predicted plan usage: Finally, how your plans are used over time, throughout the year, will factor into your new rate. This is because insurance carriers use your current plan usage to predict how your enrolled members will use coverage in the future. They then use this prediction to adjust your overall rates — again to ensure they're collecting enough premiums to cover expected claims. It’s important to note that predicted usage is based heavily on usage over time, meaning recurring claims (e.g. a predicted long-term need for non-generic prescription drugs) is more likely to have an impact on your rates than a one time, high-cost claim event (e.g. the birth of a child).
Insurers also assess company-specific data in a proprietary manner, but knowing what some of the factors are can help you understand why your rate is different from another company on Justworks.
How Justworks Helps You Navigate Renewals
Because of our role between you, the insurance companies, and delivering your rate, we try to bring a more human approach to the overall renewal process. While we do our best to ensure that your rates fluctuate as little as possible year over year, your health insurance renewal rate is ultimately determined by the insurance companies we work with.
Understanding this, we focus instead on how we can help you feel confident in your decisions. We will do the legwork behind the scenes to crunch the numbers and surface the best rate options to your team, whether it’s on our Large Group plans described above or through alternative coverage options. Each company has unique needs, and we provide diverse plans and other health-related benefits to keep your team feeling secure and valued.By grounding ourselves in our customers’ long-term success, we are able to support individual companies in navigating the tough decisions that sometimes emerge during health insurance renewals in a way that reflects our values.
We’ll also be there to help educate your team and provide guidance on how to be smart consumers of their health insurance, too. During open enrollment, we can provide them ideas around selecting and using their plans effectively. Your employees also have free access to Health Advocate through Justworks, which can further help them navigate the healthcare system and their costs, especially around more specific individual health considerations.
Renewals can seem complex and stressful at times. But when you receive your health insurance renewal, we’ll be there. We’ll help you to understand your new rate and support you to make changes to your plans and contributions, so that your coverage can best meet the needs of your team and your budget. All the way through the end of employee open enrollment, we’ll be with you and your team every step of the way.
Disclaimer
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.