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  • Jeremy Stankov

Employee Benefits Pricing 101

Employee benefits plans, like any insurance, are designed to provide financial protection and support to employees and their families.

To determine the pricing for these plans, insurance companies use a systematic process that considers a number of various factors to determine the expected risk and, therefore, pricing of each line of benefit (life, health, dental, etc.) within employee benefits plans.

Insurance companies generally use a combination of claims history (if it's available) and manual rates. Manual rates are the calculated prices for benefits based on the company's experience with their large block of business for similar types of employee groups.

This can become quite complicated for large groups (and we’re happy to discuss anytime if you have questions), but here's a very simple breakdown:


The composition of your employee group plays a crucial role. Factors like the average age of employees, gender, and whether they are full-time or part-time workers are considered. Younger, and therefore assumed healthier, groups tend to have lower premiums.


The nature of your business matters. Certain industries have more inherent risks, which can impact the pricing.

Market Conditions:

External factors such as changes in the insurance market can influence pricing. Economic conditions and healthcare trends can also play a role.

Coverage Options and Plan Design:

The type and extent of coverage offered are significant. Plans with more comprehensive coverage or additional benefits will have higher premiums and it's important to balance the needs of your employees with the cost to the company.

The specifics of your benefits plan, like deductibles, copayments, and out-of-pocket maximums also significantly affect pricing. Not surprisingly, more generous plans typically come with higher premiums.

This is an area where a knowledgeable advisor plays an absolutely critical role.


Just like any business, there are expenses that come with operating a benefits plan. These expenses are most commonly represented using a Target Loss Ratio (TLR) and include both the insurance company’s expenses and broker commissions.

Claims History:

If claims history is available, this is the most significant factor affecting the pricing of your plan. The insurance company will assess the historical claims made by your employee group to assess the expected claims going forward. Again, not surprisingly, a history of high claims will result in higher premiums.

This is another area where a knowledgeable advisor who understands the details of benefits plan pricing and your claim history plays an absolutely critical role to design a plan that will be sustainable and valuable to employees.

Pricing for employee benefits plans is a multi-faceted process that involves assessing the risk profile of your employee group, considering various factors, and tailoring the plan to meet your company's needs, budget and goals.

With over two decades of experience underwriting and selling employee benefits plans on all sides of the table, Sphyra’s advisors are very well equipped to make sure you have a great plan in place that is sustainable and priced properly.

So, when you're considering employee benefits options and selecting your advisor, remember, Sphyra Benefits is a boutique brokerage that can design the best solution for your needs now and as they evolve.

*Created with the help of ChatGPT*

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