What is a renewal report?

Have you ever been hit with a renewal report and all you can do is look at it overwhelmed while you’re being told you will be paying more in premiums, without an explanation as to why? Well, today’s blog will help you understand what a renewal report is, what's in it, and how to interpret it to stay informed.

A renewal report is a document that goes over your past year of activity on your plan. It breaks down the costs, usage, and changes, and tells you what to expect in the coming year. You can use this information to make informed decisions about what to do next, whether to stay on that plan or shop for another.

Unfortunately, for premium-based plans, there is a heaping serving of jargon, confusing numbers, and changes in coverage that you weren’t even sure you had. To sum it up, it’s hard to read and makes it even harder to make good decisions. Lucky for you, the folks over here at Blendable love to make everything transparent so we broke down the most important parts to look out for in a renewal report.

What should I expect in a renewal report?

The first thing you’ll find is a preamble that lays out what you’ll be getting into. This can be helpful, but often it's more spin than substance. Luckily, we’re here to help so you can skip right on past that part (unless you want some riveting bedtime reading) and get on into the health and dental numbers.

The health and dental numbers

Health and dental information make up the bulk of any renewal report because they have the most variables. Categories, usage, pooling, and more all impact what you end up paying with a premium-based health and dental plan.

In this section, you’ll be hit with a boatload of numbers and tables including:

• Time frame – the period being reported on
• Number of lives/certificates – the number of people on your plan (red flag alert: do you want to work with a company who refers to your team as “lives” or “certificates” instead of “members” or “people”)
• Single/Couple/Family – number of people on the plan with various types of coverage
• Billed premium – the premium $ amount you paid
• Paid claims – the $ amount of claims your insurer paid out
• Target loss ratio – what your insurer wants claims to be as a percentage of premiums

There are lots of other numbers that may be included. Various percentages, Manual Rates, Fee Guides, Credibility, and Trend numbers all help the insurance company spin how they came up with your premiums.

As we said, it can be overwhelming. That’s why it helps to focus on one thing: the cost to pay claims. How much are you paying the insurance company to pay your team’s health and dental claims?

Cost to pay claims

To get to your cost to pay claims (and help you compare plans apples-to-apples) we’re going to focus on 3 numbers from the list above:

• Billed Premium;
• Paid Claims; and
• Target Loss Ratio (TLR).

Target Loss Ratio

The TLR is essentially the insurance company saying, “This is what we want claims to be, as a percentage of premiums so that we can turn a profit.” AKA, “If we charge you $100, we expect you to use x%.”

By doing some simple math, you can see how much they’re charging you to pay each claim.

Let’s say your TLR was 77%, your insurance company charged you $100 in premiums, and you wanted to find out 𝑥 – the percentage they’re charging you to pay each claim.

Start with y, the amount you'd claim to make claims 77% of $100 in premiums

y / Premiums = Target Loss Ratio

y = TLR x Premiums

y = 77% x $100

y = $77

So to hit their TLR of 77%, the insurance company wants you to claim only $77 while charging $100 in premiums.

Now, how much are you paying for them to pay these claims?

x = cost to pay claims

x = (Premiums - Claims) / Claims

x = ($100 - $77) / $77

x = 29.8%

In this example, it's like the insurance company is charging a whopping 29.8% fee to pay your claims. To put it into perspective, let's say one of your plan members got a $100 massage every month. You’d pay close to $360 for the insurance company to adjudicate and pay those claims PLUS you’d pay the cost of the claim too, and that’s just one plan member!

Don’t forget about pooling charges

In the example above, we used Billed Premium to calculate the cost to pay a claim. But that isn’t the whole story. A premium-based plan may also include a Pooling Charge listed separately from the premiums.

We aren’t going to dive into pooling here. The short version is that pooling bundles multiple groups together to help spread out risk. This “pool” gets its own premium to pay for potential claims. That premium is your pooling charge.

Although a pooling charge is listed separately from your premiums, it’s still a cost you pay the insurer to pay out claims. So, when calculating the cost to pay claims as we did above, your “Billed Premium” needs to include any pooling charges.

Catastrophic Benefits numbers

Catastrophic Benefits (or Peace of Mind Benefits in Blendable-lingo) are simpler in some ways, and certainly more stable than health and dental premiums.

You’ll still see the number of lives, billed premiums, etc. but hopefully (knock on wood) won’t see many claims to go along with them.

“How do they come up with these premiums then?” We hear you ask.

These types of benefits are true insurance with pooled premiums. The actuaries at insurance companies have years of data they use to calculate the risk of paying claims and they spread that risk across a huge pool of groups just like yours. This generally keeps premiums low and stable. Depending on your insurance company, you may get a neat little graph or chart that showcases the changes that occurred in your company that resulted in a change in rates. The ins and outs of premiums and pooled insurance can be a confusing topic so check out our other blog the dive a little deeper into the subject.

It’s a lot, we know

Although we broke it down for you, we know it will still be a headache to get those renewals. Regardless of how well we’ve prepped you in this blog, crunching those numbers, deciding if switching plans would be best, and figuring out if you’re paying too much, it’s all a headache! Group benefits should be easier, and they can be!

We pride ourselves in being completely transparent in the way we do benefits here at Blendable. Upfront we give you transparent costs (which are usually claims plus a small admin fee) so you can go about your business with peace of mind, knowing that your costs are under control. You have enough sheets to balance, the last thing you need is an unpredictable ever-increasing cost that you feel obligated to take on. Claims are going to happen regardless of how you go about covering your team, the difference is, how much are you willing to pay to cover those claims? If not from us, take it from the company we helped save $44,000/year just by reassessing their benefits.

Get in touch

We would LOVE to continue this conversation! Get in touch today with our growth team if you have any benefits-related questions, or questions about today’s blog, heck even if you just want to say hello, we’d love that! Reading this on lunch and don’t want to have a chat? No worries, follow us on our Instagram, LinkedIn, Twitter, and Facebook for some more benefits content and updates!