Secure a Fair Health Plan Renewal With a Comprehensive Underwriting Review

SEPTEMBER 2, 2025

For employers, preparing for a renewal can be one of the most frustrating processes associated with their employee benefit programs. Many organizations do not understand how their health plan renewal is calculated, nor are they aware of the sources of revenue for the insurance carrier embedded within the renewal pricing.

Not having a clear view of what goes into a health plan renewal could result in thousands of dollars in excess premium. How the organization is impacted depends on the type of plan:

Fully Insured — When calculating renewal pricing, insurers often factor in inflated medical claims trend (the projected increase in the cost to treat patients from one year to the next), inconsistent credibility weighting, and padded claims reserves to generate additional revenue.

Self-Funded — Insurers or third-party administrators (TPAs) generate revenue from administration fees, but those fees typically make up less than 40% of the total profit. The insurance company or TPA generates remaining revenue from claims-based fees embedded in the renewal, such as network access, shared savings, and capitation (per-employee, per-month fees). Insurers often present a nominal administration fee increase (typically less than 5%) as a benefit to the employer during renewal. However, the insurer does not mention the revenue boost of 7% to 9% it will also receive from medical claims trend.

Pharmacy contracts can also be a significant source of revenue, especially for insurance carriers that have their own pharmacy benefits manager (PBM) administering the plan. This is because PBM contracts also typically include embedded claims-based revenue, but from sources like spread pricing and rebates.

With all these sources of revenue buried in the claims expense line, it is nearly impossible to negotiate a lower premium from a fair starting point. Understanding the various components that impact the cost of health plan renewals can help employers and brokers negotiate lower — and more equitable — pricing with insurers.

A Comprehensive, In-Depth Approach to Renewals

Insurance carrier renewals begin with inflated assumptions across multiple line items — and many brokers take this amount at face value when negotiating for lower rates.

USI Insurance Services’ proprietary underwriting assessment process uses claims data and underwriting principles to model what a fair renewal should be for a client and compares our renewal assessment to the renewal proposed by the insurer. This is more effective than taking the health plan out to bid with the inflated renewal as the starting point and provides transparency into the renewal calculation.

For fully insured employers, we use our assessment to begin negotiations with the insurance company, which often leads to an additional 3% to 6% reduction in renewal premium. Combined with additional negotiated rate decreases of 5% to 7%, our analysis can help reduce final renewals by 8% to 13% from the initial proposed amount.

For self-funded employers, our process identifies undisclosed sources of additional revenue for the insurer, helping to reduce expected costs by 3% to 4%. Ensuring maximum credits for PBM rebates can reduce administration fees by more than 50%.

To learn more about how we can help with your health plan renewal and other strategies to reduce health plan costs, contact your local USI benefits consultant or email ebsolutions@usi.com.