Why do premiums typically increase?
Premiums (the monthly cost for benefit coverage) typically increase every year due to increased costs for services, new technologies, increased demand, changes in population demographics and utilization.
- CMU is self-funded for Medical, Prescription Drug and Dental Benefits; therefore premiums for these plans are established each year on the projected expenses of CMU employees and their dependents.
- Vision, Life and Long Term Disability rates are established under a multi-year contract and change when the contract is renewed.
This past year CMU partnered with an actuary to refine the process used to establish premiums for the self-funded plans. CMU has been self-funded with its Medical for 5 years, which means a history of CMU's specific cost trend data is starting to emerge that is critically important to develop premium rates. In past years, since cost trend data specific to CMU was not yet available, the process used to set premium rates relied heavily on market cost trends. In the future, CMU will be able to rely more heavily on its own cost trends, which means premium rates will be expected to increase the same amount as CMU's actual cost trends.
View a presentation on CMU's historical cost trends and causes of claim costs for 06-07