Case Study:
Will the Real Health Care Trend Please Stand Up?
Maintaining a self-funded health insurance plan is one of the most powerful ways to control healthcare costs over time. To be successful, self-funding requires careful modeling, good data, and a clear strategy.
Unfortunately, many plans are still priced using inaccurate carrier plan design decrements, poor quality data, or renewal formulas that don’t reflect the true risk of the clients’ population. In the complex healthcare environment we’re in, our pricing models need precision.
Advanced actuarial modeling and underwriting strategies are available, and they are more accessible than most plan sponsors and brokers realize.
When we meet with brokers and consultants, one of the first questions they ask is: “What’s the trend?” Everyone wants to know whether health care costs are going up or down and by how much. The problem is that the true trend often gets buried under other moving parts like headcount changes, shifts in family size, benefit design tweaks, and a handful of high-dollar claims.
This case study is about how analytics helped one of our clients separate the noise from the signal and show a broker the real health care trend for their client.
The Situation
A regional employer was struggling to understand why their health plan costs were rising so quickly. On the surface, the numbers showed a year-over-year increase of 12%. Naturally, the CFO was alarmed. The broker wanted a clean explanation before walking into the renewal meeting.
But raw year-over-year numbers can mislead. Was the plan really trending at 12%? Or were there other factors driving up the total spend?
Enrollment and Member Headcount Changes
The first thing we looked at was the number of people covered by the plan. Over the last year, the employer had grown headcount by 5%. On top of that, the mix of subscribers and dependents had shifted. More employees were enrolling family coverage instead of employee-only coverage.
If you only look at total dollars spent, it looks like costs are exploding. But when you adjust for the fact that more people are being covered, the picture changes. After normalizing for enrollment growth, the underlying cost increase dropped from 12% to closer to 6%.
Benefit Design Changes
The employer had also made a few changes to the plan design. They increased the deductible by $500 and added a new copay for specialty visits. Those changes normally reduce the employer’s liability because members pay more out of pocket.
When we adjusted the claims data for these benefit changes, the trend dropped again. What first looked like a 12% jump was now showing closer to 4.5%.
Large Claimants
Next, we dug into high-cost claimants. One year had three members who each exceeded $250,000 in claims. The following year, there were only one or two large claimants. Large claims can swing the numbers by several percentage points, especially in mid-size groups.
After smoothing out the impact of large claimants, the underlying trend stabilized around 4%.
The True Story
When the broker walked into the renewal meeting with the CFO, they didn’t have to explain away a scary 12% number. Instead, they told a more accurate story:
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Headcount growth explained about half the cost increase.
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Benefit changes dampened trend by about 1.5%.
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Large claims caused noise, but not a permanent increase.
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The real health care trend, the part tied to underlying cost per member, was about 4%.
This gave the CFO confidence that the plan wasn’t out of control. It also gave the broker credibility and a much stronger position during strategy meetings.
Math Matters
Health care costs are the second largest expenses for most employers, after payroll. But looking at raw year-over-year costs can mislead. True underlying trend only emerges once you adjust for enrollment shifts, family mix, benefit design, and large claimants.
That’s where experienced analytics comes in. Tools and dashboards are helpful, but without the right actuarial lens, you risk drawing the wrong conclusions.
How Blue Raven Actuarial Helps
At Blue Raven Actuarial, this is the kind of work we do every day for brokers and consultants. We bring actuarial-grade analytics that cut through the noise and give you the real story behind the numbers. Our role is to help you add credibility with clients, strengthen negotiations with carriers, and build trust with CFOs and HR leaders who demand clarity.
In this case, analytics turned what looked like a runaway 12% trend into a manageable 4% story. That’s the difference between walking into a renewal with questions you can’t answer, or walking in with confidence.
The takeaway: When you show the real health care trend, you move from playing defense on renewals to leading the conversation. Analytics, done right, gives brokers and consultants the edge they need to protect clients and grow relationships.
Curious how we could enhance your trend analysis?
Let’s explore it together with real actuarial support.