Minimum Percent-to-Manual: The Pricing Floor Every Broker Should Understand

# Minimum Percent-to-Manual: The Pricing Floor Every Broker Should Understand

Your client has run perfectly for three years. Claims are well below expected. So why isn't the renewal rate dropping? The answer often lies in the **minimum percent-to-manual**—a critical guardrail in stop-loss underwriting.

## What Is Minimum Percent-to-Manual?

Even experience-heavy carriers have limits. The minimum percent-to-manual is a floor below which carriers cannot quote, regardless of how favorable the group's experience is. This guardrail:

- Ensures pricing stability for the carrier
- Prevents undercutting actuarial assumptions
- Protects against adverse selection
- Maintains portfolio profitability

## Typical Floor Ranges

Most carriers set this floor between **50% and 70%** of their manual rates ([Law Insider - Tiered Underwriting](https://www.lawinsider.com/clause/tiered-underwriting)).

### Example
- Carrier's manual rate: **$100 PEPM**
- Minimum percent-to-manual: **60%**
- Lowest possible quote: **$60 PEPM**

Even if experience suggests $40 PEPM, the carrier cannot go below $60.

## Why This Matters at Renewal

This limitation becomes critical for groups that have run well for multiple years. Consider this scenario:

**Year 1**: Group quoted at 70% of manual ($70 PEPM)
**Year 2**: Excellent experience; quoted at 60% of manual ($60 PEPM)—the floor
**Year 3**: Still excellent experience, but...

At renewal in Year 3, the group is already at the carrier's floor. Even with perfect claims, the renewal rate may **still increase**—not because of poor performance, but because the **manual rate itself is rising** due to medical and leveraged trend.

## The Trend Effect at the Floor

If manual rates increase 10% due to trend:
- New manual: **$110 PEPM**
- 60% floor: **$66 PEPM**
- Renewal increase: **10%** (from $60 to $66)

The client did nothing wrong—they're simply experiencing the floor effect combined with trend.

## Regulatory Context

Some states and the [NAIC Stop-Loss Insurance Model Act (#92)](https://content.naic.org/sites/default/files/inline-files/SLI_SF.pdf) govern aspects of stop-loss coverage standards. The model establishes minimum attachment points (specific ≥ $20,000; aggregate ≥ 110% of expected claims for groups of 51+), but enforcement varies by state.

## Strategies for Groups at the Floor

1. **Shop carriers** with lower floors or different philosophies
2. **Increase specific deductible** to reduce premium base
3. **Add aggregating specific deductible** for premium relief
4. **Negotiate rate caps** for multi-year stability
5. **Set expectations early** so clients understand the dynamics

## Key Takeaways

- Percent-to-manual floors limit how low carriers can quote
- Groups at the floor will see increases driven by trend alone
- Understanding floors helps set realistic renewal expectations
- Strategic carrier selection can optimize floor positioning

*This article is part of our series on stop-loss underwriting. For a comprehensive overview, see our whitepaper: [Stop Loss Underwriting: A Deep Dive](/resources/whitepapers/stop-loss-underwriting-deep-dive).*