According to PwC's Behind the Numbers 2027 report, commercial healthcare is expected to increase 9% in 2027 while the Individual market is trending at 8.5%. Based on a survey of 27 US health plans, medical cost trend is at its highest level in almost two decades.
PAKG Benefits is seeing fewer and fewer single-digit increases as we have entered Q4. Groups operating in surpluses are getting 30% increases due to flagged emerging claims, while groups running double-digit deficits are getting renewals in the teens. The truth is, underwriting has seemingly become more unpredictable for brokers as AI and predictive modeling are being leveraged by many insurance carriers.
Projected claims over past experience
Projected claims are now at the forefront of many renewal conversations rather than experience rating. AI is helping insurance carriers flag emerging high costs that weren't as visible in the past. Couple that with rate trends nearing double digits and a lot of groups that look healthy to the broker can ultimately receive unexpected rate hikes.
AI is pushing costs from both sides
PwC's report points to AI as the leading driver for increased healthcare costs, particularly when it comes to coding and documentation by healthcare providers. So, AI is pushing costs from both sides: providers are using it to bill more, and carriers are using it to price for what's coming. Other factors include the No Surprises Act, increasing usage of specialty drugs and GLP-1s, and an increase in behavioral health utilization.
Uncharted territory
We have officially entered uncharted territory, my friends. Make sure you have the right team on your side to help navigate this new landscape. If your broker tells you that you don't have options and a 20%+ renewal is the right decision without showing you feedback from the market, it might be time for a new broker.