Why Rates Keep Going Up — And What You Can Do About It

You open the renewal letter. The number is higher than last year. Again.

Maybe your broker says “the market went up.” Maybe they point to a couple of large claims. Either way, the message is the same: pay more, get the same thing.

If this feels familiar, you’re not alone. Businesses across the country face the same cycle every year, and most never learn that there are real alternatives.

The annual increase isn’t random

When your premiums climb year after year, sometimes well into the double digits, it’s not because healthcare suddenly got that much more expensive overnight. It’s because of how the traditional insurance model works.

In a fully funded plan, you pay a fixed premium to a carrier. The carrier pools your money with thousands of other businesses, pays out claims, takes a cut for administration, and keeps whatever’s left as profit. Next year, they recalculate based on the pool’s overall performance, and your rate goes up accordingly.

Here’s the part that stings: even if your team was healthy and your claims were low, you can still get hit with a big increase. You’re sharing risk with the entire pool, and you’re paying for other companies’ bad years.

Three forces pushing your rates higher

1. Medical inflation is real — but it’s not the whole story. Healthcare costs do rise faster than general inflation. New drugs, new procedures, hospital consolidation — these are genuine cost drivers. But underlying medical trend accounts for only a portion of what employers see at renewal. If your renewal increase is well above underlying medical trend, something else is going on.

2. You’re subsidizing the pool. In a fully funded arrangement, healthy groups subsidize less healthy ones. Carriers price based on the average, not on your specific experience. If your team is younger, healthier, or more careful about utilization, you’re likely overpaying. You’d never know it, because you don’t see the data.

3. The incentives aren’t aligned with yours. Your broker earns a percentage of your premium. Your carrier profits from the spread between what you pay and what they pay out in claims. Neither party has a financial incentive to bring your costs down. That’s not a conspiracy. It’s just how the model works.

The information gap that keeps you stuck

Here’s what makes this cycle so hard to break: with a fully funded plan, you don’t see your own claims data. The carrier owns it. You pay premiums in, and the only number you ever see is next year’s rate.

That means you can’t answer basic questions like:

• Are we overpaying relative to our actual claims?
• Which cost drivers are we actually exposed to?
• Would we have saved money last year under a different structure?

Without that information, you’re making one of your largest budget decisions in the dark. And your broker may not be volunteering alternatives, because the current system works just fine for them.

What growing businesses are doing differently

The businesses that break this cycle tend to do three things:

They get visibility into their numbers. Even before switching plan structures, they request a summary of claims experience from their carrier (you’re entitled to it in many states). This alone changes the conversation.

They explore alternative plan structures. Level-funded and self-funded plans give employers access to their claims data, the potential to benefit from good years, and real control over plan design. These aren’t just for large companies anymore: businesses with as few as 10 employees are making the switch.

They find an advisor who’s aligned with their interests. Not every broker is the same. Some are paid on commission, which means they earn more when your premiums are higher. Others offer transparent, flat-fee arrangements that align their incentives with yours.

The renewal doesn’t have to be a guessing game

If you’re tired of opening that envelope and hoping for the best, there’s a better way. It starts with understanding what’s actually driving your costs, and whether the structure you’re in is still the right one for your business.

We put together a guide specifically for this moment. It covers the warning signs that you’re overpaying, the questions to ask your broker at renewal, and a step-by-step framework for evaluating your options.

Get the full playbook. Download The Rate Shock Survival Guide — a free, practical guide built for business leaders who are done accepting double-digit increases as inevitable. Get your copy here.