The Illogic of Employer Health Plan Renewal Increases

Fourth-quarter has arrived, and brokers are once again negotiating with health insurance carriers on behalf of their clients to reduce renewal increases. Anyone who’s been in the industry for a few years knows this annual ritual. The carrier renewal letter arrives with a 12% to 15% rate increase with little or no reason for the increase.

BUCA carriers are getting less transparent with sharing claims experience data despite transparency-focused legislation by the federal government.  Most major medical PPOs and HMOs have a baseline annual premium trend increase of about 12%, not including demographic changes or claims experience. Providing a logical explanation of this number to brokers during my years as a BUCA carrier rep was as difficult as it was frustrating for me to hear the same explanation as a broker. Curiously, carriers readily reduce or back off the initial renewal offer simply by the broker presenting competitor offers. It’s almost as if the initial offer was a made-up number, especially when considering that Medicare’s pricing index has an annual trend increase of 1.6%!

Predictably, ClaimDOC clients have an average annual increase of only 2%. Let’s take a quick look at industry financials then break down the numbers. 

Does publicly available data support the need for annual health insurance premium increases of 12% due to the cost of service increases at our nation’s largest health systems? Short answer, no. Revenue and profit margins have soared for health insurers, hospitals, and hospital systems since the passage of the Affordable Care Act. 

  • 724% stock price increase of our nation’s five largest health insurance carriers since March 4, 2010.
  • 226% increase of Dow Jones over the same period.
  • 224% stock price increase of two of our nation’s largest health systems in the past five years.

What does ClaimDOC repricing data say?

  • ClaimDOC determines the dollar amount reimbursed for facility claims by comparing what the payment will be at 125% of Medicare and at 120% of the cost to charge ratio, then paying whichever amount is greater.
    • 120% of the cost to charge means 20% above the facility’s own reported cost.
  • Since our inception in 2013, approximately 85% of all claims were paid at the 125% of Medicare rate, as this was the higher amount.

Therefore, analysis shows increasing annual premiums at 8%, 10%, or 12% is not justified. Neither cost of providing or insuring services is increasing by double digits annually. If it was, 85% of our payments to facilities would be at the cost to charge ratio and not the Medicare ratio that continually exceeds cost at a nominal 1.6% annual increase.

ClaimDOC’s fair payment solution for health plans provides a smooth off-ramp from the BUCA merry-go-round.

  • Access – over 90% of PPO and HMO network providers accept ClaimDOC RBP.
  • Savings – 25% to 35% the first year with a sustainable 2% to 3% annual premium increase.
  • Balance Bills  – only 2% of all claims. Unlike PPO plans, ClaimDOC assumes all liability.


“You cannot reason with a tiger when your head is in its mouth,” Winston Churchill