Larger groups are rated on their own claims, weighted by credibility.
In experience rating, the carrier blends your own claims with a manual rate. The more credible your experience is, the more weight it gets.
How a carrier turns your claims into a renewal rate
In experience rating the carrier starts with a manual rate, which is the price it would charge a group of your size, age and location with average claims. It then compares that to what your group actually cost, and blends the two. The weight given to your own claims is the credibility factor.
Credibility depends mostly on size. A very small group has so few members that one large claim can swing the numbers, so the carrier gives most of the weight to the manual rate. A larger group has a more stable claims history, so its own experience counts for more. At the largest sizes the renewal can be built almost entirely from the group’s own experience.
The result can still be adjusted. Carriers add a trend factor for expected medical cost growth, a margin for expenses and risk, and sometimes a cap or a pooling charge for large claims. Each of these is a separate decision, and each can be questioned.
The useful move for an employer is to ask how the renewal was built. We ask for the credibility factor, the trend assumption, the manual rate, how large claims were treated, and the claims period used. If those pieces do not reconcile to the final rate, we say so.
What to decide and where it connects
Small Group Rating
How smaller groups are rated.
Pooling and Large Claims
How large claims are limited.
Run the Calculator
Calculate your group’s loss ratio.
Questions about this topic
What is credibility?
It is the weight a carrier gives your group’s own claims when setting rates.
Does larger size mean more credibility?
Generally yes, because more lives make the experience more reliable.
Can we see how our renewal was built?
Ask the carrier for the rate build-up. We review it with you.
Ready? Send us your renewal, or talk it through with someone first. General information, not legal or tax advice.
Where these details come from.
CMS: Medical Loss Ratio: Federal MLR rule and rebate guidance.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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