Take Control of Your Renewal: How to Estimate Your Costs Before Open Enrollment

Open enrollment season is approaching, and for fully insured businesses, its often a time of uncertainty. Many companies wait anxiously for their renewal rates, not knowing if they’ll need to switch carriers based on prices. But if you’re self-insured and part of a captive program, you have more control and flexibility. Curious about how this works? Let’s break it down.

1. Estimate Your Aggregate Claims

Aggregate claims are typically the largest component of your renewal estimate. Here’s how you can estimate them:

• Review your claims data from the past 24 months, capping each claim at your specific deductible amount.
• Convert these numbers to a per-employee-per-month (PEPM) rate to account for changes in your workforce.
• Apply an adjustment for medical inflation (usually around 6-8%) and multiply by your anticipated employee count.

For example, if your average claims PEPM is $490, applying an 8% adjustment brings it to $529.20. If you have 200 employees, the total estimate is about $1.27 million annually. This step gives you a solid foundation for your renewal calculation.

2. Calculate Your Stop Loss Premium

Stop loss premiums tend to increase faster than standard medical costs, often by around 15%. If your current premium is $400,000, a 15% increase would estimate your renewal premium at $460,000. This calculation helps you prepare for a predictable increase and avoid surprises.

3. Account for Additional Expenses

For self-insured businesses, third-party administrator (TPA) costs are a key component. If your TPA charges $50 PEPM, this totals $120,000 annually. Assuming a modest 3% increase, your renewal estimate would be approximately $123,600.

4. Put It All Together

Adding up your aggregate claims, stop loss premium, and TPA expenses provides a comprehensive estimate. In this case, it totals roughly $1.854 million. This allows you to set accrual rates and schedule open enrollment confidently, even if the final stop loss quote varies slightly.

Want to Learn More About Captives?

Captive programs offer a way to plan ahead and reduce the uncertainty of open enrollment. With a captive, you can estimate renewal costs accurately, adjust early, and avoid last-minute rushes. If you’re not part of a captive, you might be missing out on the benefits of greater predictability, flexibility, and cost control.

Curious about how captives could work for your business? Reach out to me to learn more about how joining a captive program can provide stability and savings. [email protected]