When Health Insurance Premium Growth Outpaces Medical Inflation – Why the Loss Ratio Doesn’t Fall
Earlier this week, I met with a client who asked a question that gets to the heart of why so many international schools feel trapped in a cycle of rising health insurance costs:
“If our premiums keep increasing at a higher rate than medical inflation – which we know is one of the largest reasons for our premium increases – why does our loss ratio not improve and still consistently track at around 90%?”
It’s a fair question. And one that I’ve been reflecting on since our meeting.
The Data Behind the Question
This particular school is based in Southeast Asia. Over the past 10 years, compounded medical inflation in their country was ~104% Over that same period, their premiums have increased by ~110% – slightly above medical inflation, but not dramatically so.
However, when we zoom in on the last six years (2019–2025), the picture changes sharply:
- Premiums increased by 108%
- Medical inflation increased by 67%
In other words, premiums have risen about 1.6× faster than underlying inflation. Their total premium has doubled, while the number of covered lives has increased by less than 10%.
At the same time – and this is a key point – the loss ratio has remained flat, averaging ~90%. So why isn’t the loss ratio improving?
Why the Loss Ratio Isn’t Falling
In theory, when the insurer adjusts premiums for medical inflation and trend, the plan should gradually move back toward equilibrium – especially if utilisation stays constant. In practice, that hasn’t happened.
The issue isn’t that the insurer’s renewal pricing model is “wrong.” It’s that the plan’s underlying cost base (meaning average cost per claimant) keeps shifting upward. Even small, cumulative changes in utilisation, case severity, and where staff seek treatment can offset the effect of large premium corrections.
The model has maintained stability, but not sustainability. It’s done enough to keep the plan from deteriorating further, but not enough to create the downward trend in claims needed for long-term rate stability.
Put simply, the loss ratio has stopped worsening, but it hasn’t started improving. That’s the gap we now need to close.
A Decade of Stability (= No Plan Design Changes) But at a High Cost
It’s worth highlighting a really critical point – the school’s health insurance plan design hasn’t changed in 10+ years. It remains highly generous, with minimal cost-sharing and few mechanisms to steer staff toward more cost-effective healthcare providers.
That generosity has value (which the school is very keen to maintain) but it also means the plan absorbs every ounce of medical inflation, utilisation growth, and provider price escalation directly. Without structural changes, each premium correction merely keeps pace with these pressures rather than bending the curve.
The result is what we see today:
- A stable, predictable loss ratio of 90%,
- A doubling of total premiums in just six years, and,
- Renewals that remain in double digits instead of the 2-4% schools aim for.
The Path Forward
To move from stability to sustainability, schools need to go beyond inflation corrections and start fixing the underlying trend – the combination of how often care is used and where it’s accessed.
That doesn’t mean slashing benefits. It means:
- Using data to identify high-cost drivers.
- Introducing smart, balanced cost-sharing where it actually changes behaviour.
- Partnering with insurers to promote high-quality, mid-cost providers.
- Communicating clearly with staff so trust isn’t lost in the process.
This is how schools begin to flatten the claims trend and bring rate actions back into the sustainable range.
In conclusion, the insurer’s renewal pricing model has done its job – it’s kept the loss ratio from ballooning out of control and prevented the plan from collapsing. But now it’s time to make it sustainable. That means shifting from reactive price adjustments to proactive plan management – closing the gap between stability and sustainability.
At One World Cover, we help schools do exactly that through our OWC Blueprint – a proven, repeatable, data-led framework for building long-term, financially sustainable faculty health plans. Our approach gives schools the data, structure, and transparency they need to flatten the loss ratio curve, protecting faculty, and achieving sustainable renewals in the 2-4% range.
To learn more please get in touch: [email protected] or click here to contact us.
