Small business health insurance rates can go up even when the employer believes the group had a relatively favorable year.
That can be difficult to understand.
The increase may represent thousands of dollars in additional monthly expense. For a small company, that can affect budgets, employee contributions, hiring decisions, and whether the current plan remains sustainable.
The first question is usually:
“Why did our rates go up?”
There is not one answer that applies to every group.
The explanation depends first on the type of health plan the company has. An ACA plan, an Ohio MEWA, a level-funded arrangement, and an older legacy plan may treat employee ages, claims experience, underwriting, medical trend, and plan changes differently.
The renewal notice may show the new rates without clearly showing how those factors produced them.
The purpose of this page is to separate the possible causes, explain which ones may apply to your plan, and identify what can and cannot reasonably be learned from the renewal.
At a Glance
- The reason rates increased depends partly on how the health plan is priced.
- ACA plans, Ohio MEWAs, level-funded arrangements, and legacy plans do not all treat claims and underwriting the same way.
- Employee ages, enrollment changes, dependents, and coverage tiers can affect the total premium.
- Medical trend reflects projected future healthcare costs, not simply what one employer’s group spent last year.
- A favorable claims year does not necessarily guarantee a flat renewal.
- A modest rate increase may be accompanied by meaningful reductions in benefits.
- Understanding the likely causes of the increase helps the employer decide what to review next.
Start by Identifying What Type of Health Plan You Have
The same percentage increase can have different causes depending on the type of plan.
Before trying to explain the renewal, identify whether the company has:
- An ACA small-group plan
- An Ohio MEWA plan
- A level-funded plan
- An older or legacy plan
- Another employer health insurance arrangement
The plan type helps determine which rating rules, underwriting methods, and claims-related factors may apply.
ACA small-group plans
ACA small-group plans use community-rating rules.
Premiums may generally vary based on permitted factors such as age, geographic area, family size, tobacco use where applicable, and the plan selected. An employer group’s own medical claims and employee health status are not permitted group-specific rating factors in the ACA small-group market.
That means an employer can have a favorable claims year and still receive an increase.
The carrier may be adjusting rates across a broader pool based on projected healthcare costs, provider pricing, prescription expenses, age-related factors, and the overall pricing of the plan.
Learn more about ACA small business health insurance in Ohio.
Ohio MEWA plans
Ohio MEWA plans bring multiple employers together through a chamber, trade association, or another qualifying organization.
If your company is already participating in a MEWA, the immediate question is how the program developed the renewal rates.
There is not one renewal formula that applies to every Ohio MEWA.
Depending on the program, the renewal may reflect several factors:
- Medical trend
- Employee and dependent demographics
- Plan design
- The group’s underwriting profile
- Claims-related experience, where applicable
- The performance of the broader MEWA pool
- Arrangement-wide pricing changes
The relative importance of those factors can vary from one program to another.
A group may believe it had a favorable year and still receive an increase because broader pool costs, medical trend, demographics, or program-wide pricing changed. In another MEWA, the group’s own underwriting or experience may have a more visible effect on the renewal.
These arrangements operate under Ohio Chapter 1739. Ohio law requires Chapter 1739 MEWAs to file rate information, actuarial support, and risk classifications and to certify that their underwriting and rating methods follow accepted actuarial practices and are applied consistently.
That does not mean the employer receives a formula showing exactly how much each factor contributed to the renewal.
The practical point is that Ohio MEWA renewal pricing is program-specific. Several forces may affect the increase at the same time, and the renewal materials may not disclose how much weight the program assigned to each one.
Learn more about Ohio MEWA health plans.
Level-Funded plans
Level-funded plans are generally medically underwritten.
The carrier may consider factors such as:
- Employee and dependent demographics
- Health information collected through underwriting
- Claims performance
- Expected future claims
- Stop-loss costs
- Plan design
- Broader carrier pricing assumptions
Underwriting can affect whether a carrier offers a quote, what the proposed rates are, and what happens at renewal.
The precise calculation varies by carrier and arrangement. A favorable claims year can help, but it does not necessarily prevent the carrier from applying medical trend, demographic adjustments, stop-loss increases, or other forward-looking pricing factors. Ohio MEWAs and level-funded products should therefore not be described as though they use the same underwriting and proposal practices.
Learn more about level-funded health insurance in Ohio.
Older or legacy plans
Some Ohio employers still have plans established before the current ACA small-group market became standard.
Legacy arrangements can vary considerably.
Their renewals may reflect:
- The plan’s historical pricing
- The age and composition of the group
- Claims or pool experience where applicable
- The richness of the benefits
- The performance of the broader block of business
- Carrier decisions about older plan portfolios
Some legacy plans tend to renew with substantially the same benefits rather than moving the group into a newly designed plan.
When benefits remain intact, more of the increase may reflect the underlying pricing forces affecting the plan.
Our Small Business Health Insurance Options in Ohio page provides a broader overview of the approaches available to Ohio employers.
What Is Medical Trend?
Medical trend is an actuarial estimate of how the cost and use of healthcare are expected to change during a future period.
It may reflect anticipated changes involving:
- Hospital and physician prices
- Prescription drug costs
- The frequency with which healthcare services are used
- New treatments and medical technologies
- Higher-cost procedures and specialty medications
- Provider-contract changes
- Expected claims severity
Medical trend is forward-looking.
It is not simply a report of what one employer’s group spent during the previous year.
Actuaries review available experience and attempt to estimate what the coming period may cost. Carriers then incorporate their own pricing, underwriting, reserve, and business assumptions.
Why Can Rates Increase After a Favorable Claims Year?
A favorable past year and a higher future renewal are not necessarily contradictory.
A recent level-funded renewal illustrates the difference between looking backward and pricing forward.
One of our small level-funded clients received a meaningful credit because the group’s claims were lower than the amount funded for the prior year.
The employer was pleased to receive the credit.
The renewal still increased by approximately 12 percent.
The natural question was:
“If our claims were good enough to return money, why did the rates still increase?”
The two calculations were looking in different directions.
The credit looked backward. It reflected how the prior year’s actual claims compared with the amount that had been funded.
The renewal looked forward. It reflected what the carrier expected the coming year to cost.
That forward-looking calculation could include:
- Medical trend
- Employee and dependent demographics
- Expected future claims
- Stop-loss pricing
- Plan design
- Carrier-wide pricing changes
- Other underwriting assumptions
A favorable claims year may improve the result without completely offsetting the other forces affecting the renewal.
Do Our Employees’ Claims Affect the Renewal?
It depends on the type of plan.
For an ACA small-group plan, the specific employer group’s claims history and employee health status are not used as group-specific premium-rating factors. ACA small-group rates are limited to permitted rating factors such as age, geography, family size, tobacco use where applicable, and plan choice.
For an Ohio MEWA, level-funded plan, legacy arrangement, or another experience-sensitive structure, claims or underwriting may have a more direct or indirect influence.
Even then, the renewal may reflect several things at once:
- Large claims
- Overall claims frequency
- Expected future claims
- Group demographics
- Pool performance
- Stop-loss costs
- Carrier pricing
- Plan design
A large renewal does not necessarily mean that one employee or one medical event caused the entire increase.
The carrier may not disclose enough information to assign a precise percentage of the renewal to each factor.
Why Did Our Rates Increase When We Had No Large Claims?
There are several possible explanations.
The plan may be community rated, which means the group’s particular claims were not used to determine its premium.
The broader carrier or MEWA pool may have experienced higher costs.
Medical and prescription trend may have increased.
The employees and dependents may be older than they were when the previous rates were calculated.
Enrollment may have changed.
The carrier may have adjusted the pricing of the entire plan portfolio.
Stop-loss, provider, administrative, or other costs may have changed.
The prior rate may also have been especially favorable and no longer aligned with what the carrier expects the coming year to cost.
The absence of a known large claim does not necessarily produce a flat renewal.
How Employee Ages and Enrollment Can Change the Premium
The carrier’s stated renewal percentage and the change in the company’s total monthly bill are related, but they are not always the same calculation.
The total premium can change because:
- Employees or dependents were added
- Employees or dependents left the plan
- Employees changed coverage tiers
- New hires completed a waiting period
- Employees or spouses moved into higher age-rated premiums or age bands
- Someone became eligible for Medicare or other coverage
- The renewal was prepared using enrollment information that is now several months old
Per-member or age-rated premiums
Some plans show a separate rate for each covered employee and dependent.
In that arrangement, an age-related increase may be relatively easy to identify. An employee who becomes one year older may have a different rate even before the carrier’s broader renewal adjustment is applied.
ACA small-group pricing generally uses age and other permitted factors at the member level, although composite or average amounts may sometimes be presented to the employer.
Composite or tiered premiums
Other plans show rates by coverage tier, such as:
- Employee only
- Employee and spouse
- Employee and children
- Family
The underlying ages and demographics may still affect the group’s pricing, but the effect is blended into the tier rates.
That can make it harder for the employer to see how age or demographic changes contributed to the renewal.
Age-band or bracket rates
Some legacy or other arrangements may use broader age brackets, such as ages 50 through 54 or 55 through 59.
When an employee or spouse moves into a higher bracket, the rate may take a noticeable step upward.
In a small group, one or two people crossing an age band can have a visible effect on the total premium.
An increase caused by age or an age-band change is real, but it should be distinguished from the carrier’s broader renewal adjustment and from changes in enrollment.
Our guide on what to do when your small business health insurance renewal increases in Ohio explains how to separate these changes when reviewing the renewal.
Did the Plan Change Along With the Rates?
Before evaluating the renewal percentage, confirm whether the group is actually renewing into the same plan.
A relatively modest increase may be accompanied by:
- A higher deductible
- A higher out-of-pocket maximum
- Less favorable coinsurance
- Different office visit benefits
- Higher emergency room or inpatient hospitalization cost-sharing
- Different prescription benefits
- A narrower provider network
Those changes may shift more claim expense to employees.
A carrier may renew the group into a replacement plan after discontinuing or redesigning the current option. The new plan may have a similar name while containing meaningful benefit differences.
A low renewal increase is not necessarily a favorable renewal if the benefits were significantly reduced at the same time.
The current and renewal Summary of Benefits and Coverage should be compared whenever the group is being moved into another plan.
Renewal materials do not always include the SBC for the replacement plan. It may need to be requested separately before an accurate comparison can be completed.
The reverse can also be true.
Some older or legacy plans renew with substantially the same benefits. When the plan design remains intact, more of the increase may reflect medical trend, demographics, pool performance, claims experience where applicable, and the historical pricing of the plan.
Our Small Business Health Insurance Cost in Ohio page explains how deductibles, coinsurance, out-of-pocket limits, prescriptions, networks, and other plan features affect premiums.
Why Can the Carrier’s Explanation Feel Incomplete?
Employers often want a precise answer:
“What caused our increase?”
The carrier may provide:
- The stated renewal percentage
- A general explanation involving medical trend
- Aggregate claims information
- An underwriting result
- A plan comparison
- Broad information about market conditions
Ohio law requires small-employer carrier materials to disclose provisions concerning the carrier’s right to change rates and the factors that may affect rate changes. That does not necessarily mean the employer receives a detailed formula showing how much weight the carrier assigned to each factor in a particular renewal.
A broker may be able to identify which factors are relevant without being able to reproduce the carrier’s entire actuarial calculation.
The renewal documents do not always disclose:
- How much of the increase represents medical trend
- How much reflects the group’s experience
- How pool performance affected the result
- How demographic changes were weighted
- How carrier pricing assumptions changed
That uncertainty should be acknowledged.
The employer deserves the clearest explanation available, but we should not pretend to know a precise cause the carrier has not disclosed.
Should an Employer Try to Identify Who Generated the Claims?
No renewal review should become an effort to identify which employees or family members generated claims.
The useful business questions are:
- How is this plan priced?
- What does the aggregate information show?
- Which factors may have affected the renewal?
- What practical alternatives are available?
Employers should rely on appropriately protected aggregate information and should not use an individual employee’s medical or claims information to make employment decisions.
This requires particular care in a small company, where even limited age or demographic information may make it possible to infer who experienced a claim.
Understanding the renewal does not require identifying individual claimants.
Does a Rate Increase Mean the Current Plan Is No Longer Competitive?
Not necessarily.
A substantial increase may still leave the current plan competitive when compared with:
- Other plans from the same carrier
- Other insurance companies
- Other funding arrangements
- Available provider networks
- Prescription coverage
- Employee deductibles and out-of-pocket costs
- Underwriting results
- The disruption created by changing coverage
The opposite can also be true.
A modest increase may occur on a plan that was already expensive compared with the broader market.
Evaluating only the alternatives inside the current carrier does not always reveal whether the overall arrangement remains competitive.
The rate increase needs to be understood first. The employer can then decide how broadly to review the market.
See What to Do When Your Small Business Health Insurance Renewal Increases in Ohio for the full decision process.
What Questions Should You Ask About the Rate Increase?
Ask:
- What type of health plan do we have?
- What is the carrier’s stated rate increase?
- How does that differ from the change in our total monthly premium?
- Did any census changes affect the total?
- How are ages reflected in our rates?
- Did the plan benefits, prescription coverage, or provider network change?
- Does the plan use community rating, medical underwriting, claims experience, or another pricing method?
- Is aggregate claims or underwriting information available?
- Did the carrier provide the current and renewal SBCs?
- Were other plans from the current carrier reviewed?
- Should the employer compare the broader market?
- When must the renewal decision be made?
These questions may not produce a perfect actuarial explanation.
They can, however, separate the major forces behind the increase and help the employer determine what deserves further review.
How McCarthy Stevenot Agency Reviews a Rate Increase
McCarthy Stevenot Agency has worked with Ohio small employers since 1991.
When an employer asks why its rates increased, we begin by identifying the type of plan and how that arrangement is generally priced.
We then:
- Confirm the current and renewal rates.
- Reconcile the renewal census with current enrollment.
- Separate the carrier’s rate adjustment from changes involving age, enrollment, or coverage tiers.
- Confirm whether the group is renewing into the same benefits.
- Obtain the appropriate plan documents when they are missing.
- Review available carrier, underwriting, or aggregate claims information.
- Identify which factors are known and which remain uncertain.
- Explain what the increase means for the employer and employees.
- Determine whether other plans or coverage approaches should be reviewed.
We do not want to give an employer a vague answer such as:
“Healthcare costs went up.”
Sometimes that is part of the explanation, but it is rarely the entire conversation.
We also will not claim to know exactly how the carrier calculated the renewal when that information has not been disclosed.
The goal is to make the increase less opaque, identify what can reasonably be established, and help the employer understand what to do next.
Get Help Understanding an Ohio Small Business Health Insurance Rate Increase
Call McCarthy Stevenot Agency at 513-891-9888 or use our contact form.
It is helpful to have:
- The current rates
- The renewal rates
- The renewal notice
- Current and renewal plan information
- The employee census or enrollment
- The employer contribution
- Any explanation already provided by the carrier or broker
We will help identify which factors are relevant to the plan, what the available information shows, and what questions should be answered before the renewal decision is made.
Frequently Asked Questions
Why did our small business health insurance rates go up?
Rates may increase because of medical trend, carrier pricing, employee ages, enrollment changes, plan design, pool performance, underwriting, claims experience, or a combination of factors. Which factors apply depends largely on the type of health plan the company has.
Do employee claims affect small business health insurance renewals?
It depends on the plan. An employer group’s specific claims experience is not used as a rating factor for an ACA small-group plan. Claims and underwriting may have a more direct or indirect effect in MEWA, level-funded, legacy, or other experience-sensitive arrangements.
Can our rates increase even if we had no large claims?
Yes. The plan may be community rated, medical trend may have increased, the broader pool may have experienced higher costs, employee ages or enrollment may have changed, or the carrier may have repriced the plan.
Why did our level-funded rates increase even though we received a claims refund?
A refund generally looks backward and reflects how actual claims compared with the amount funded during the prior period. The renewal looks forward and may also reflect medical trend, group demographics, underwriting, stop-loss costs, plan design, and the carrier’s expectations for the coming year.
Do employee ages affect small business health insurance rates in Ohio?
Yes. Some plans use a separate age-rated premium for each covered person. Others use composite or tiered rates that blend age and demographic effects into employee-only, employee-and-spouse, employee-and-children, and family rates. Some legacy plans may use broader age brackets.
What is medical trend in health insurance?
Medical trend is an actuarial estimate of how the cost and use of healthcare are expected to change during a future period. It may include projected changes in hospital costs, physician services, prescriptions, utilization, treatments, and other claims expenses.
Why is our total premium increase different from the carrier’s renewal percentage?
The total premium may also reflect employees or dependents being added or removed, age changes, movement among coverage tiers, new hires completing a waiting period, and other enrollment changes.
Does a large claim automatically cause a large renewal increase?
No. The effect of claims depends on the plan’s pricing method. Even in an experience-sensitive arrangement, the renewal may also reflect demographics, medical trend, pool performance, stop-loss pricing, plan design, and carrier assumptions.
Can the employer find out which employee caused the claims?
The renewal review should focus on appropriately protected and aggregate information rather than attempting to identify individual claimants. The employer does not need to know who incurred particular claims to evaluate the plan and renewal.
Can a broker negotiate a health insurance renewal increase?
Depending on the carrier and arrangement, a broker may be able to request clarification, provide updated information, seek reconsideration, appeal an underwriting result, review other plans, or compare the broader market. Not every renewal is negotiable in the same way.
Does a rate increase mean we should change plans or carriers?
Not automatically. The renewal should be compared with the available alternatives, including benefits, networks, prescriptions, employee costs, underwriting, and disruption. A substantial increase may still leave the current plan competitive, while a modest increase may occur on a plan that was already expensive.
Related Resources
- What to Do When Your Small Business Health Insurance Renewal Increases in Ohio
- Small Business Health Insurance Cost in Ohio
- Small Business Health Insurance Options in Ohio
- Small Business Health Insurance Renewal System
Disclaimer
This page is intended for general educational purposes and does not constitute legal, tax, financial, actuarial, or medical advice. Health insurance rules, underwriting practices, rating methods, participation requirements, carrier availability, plan designs, and regulatory interpretations may change over time and can vary based on the employer and arrangement. Employers should evaluate specific situations with appropriately licensed professionals before making benefits decisions.