Kaminski Leduc, Senior Legislative Attorney. The insurer determines the premium based on the health and demographic profile of the geographic region or the total population covered under a particular policy that it insures.
Under community rating, higher cost groups e. The expenses of all participants are pooled together and then spread out equally across all participants. Most states impose composite plan versus age gender tables restrictions on insurers with respect to developing premiums for small employer groups i.
Rate restrictions were enacted as a way to stabilize the small group insurance market. They are intended to prevent dramatic premium swings and normalize the premiums charged so that more small employers, and their employees, might be able to obtain, and afford to keep, health insurance. Connecticut is one of nine states that require insurers to use adjusted community rating when developing rates for small employer groups. The adjustment factors permitted vary by state and are described below.
New York requires community rating. The District of Columbia, Hawaii, Pennsylvania, and Virginia do not have rate restrictions for small composite plan versus age gender tables. The extent to which premiums can vary depends on the size of the rate band permitted and the factors that must be limited. Most states with rate band requirements also permit insurers to vary premiums for age, gender, composite plan versus age gender tables, industry, geography, and group size to the extent the variation is actuarially justified.
It is generally accepted that experience rating small groups is too burdensome on such employers and their employees because it can result in wide premium fluctuations year over year. With respect to age, the model act permits age brackets in at least five-year increments that begin with age 30 and end with age 65 NAIC Model Laws, Regulations and Guidelines Most states have adopted rating requirements that differ from the model act. New York requires health insurers selling small group policies to charge community-rated premiums.
Allowable case characteristics often include age, gender, industry, geographic area, family composition, and group size. It also requires any differences in the base premiums that an insurer charges for different health benefit plans to be reasonable and reflect objective differences in plan design.
Any such differences cannot include variations based on the nature of the groups that the insurer assumes will select the particular health benefit plans. An insurer may adjust the community rate i. The law requires an insurer to collect data for all demographic rating classifications before quoting premiums to a small employer group.
It prohibits an insurer from making inquiries regarding health status or claims experience of the small employer group, its employees, or their dependents, before quoting a premium. Specifically, such a plan will be exempt from the adjusted community rating requirement if, effective After school operation plan 1,it: Eight other states require insurers to use adjusted community rating for small employer groups: Additional adjustments permitted for: Gender, health status, claims experience, and policy duration.
Additional adjustments are permitted for family composition. Provision sunsets June 30, Additional administrative discount may be offered to a small employer that purchases other insurance products from the same insurer. Health status, occupation, and anything else not specifically permitted. The base premium may be adjusted for: The resulting amount must fall within a rate band of 0.
Additional adjustments may be made outside the rate band for: The commissioner must name at least five composite plan versus age gender tables geographic regions of the state. Anything not specifically permitted. Variations in rates between products must be solely due to variations in coverage design or provider contracts.
Age adjustments must be in five-year bands and as otherwise specified in law, composite plan versus age gender tables. The maximum rate differential allowed after making all adjustments is a 3.
Health status, claims experience, coverage duration, geography, and any other group characteristic, composite plan versus age gender tables. Adjustments are permitted for: Age classifications must be, at a minimum, composite plan versus age gender tables, in five-year increments.
There must be up to six geographic areas, none smaller than a county. Different rates may be established for individuals and family units. Rate variation between different plans must be based solely on objective differences in plan design.
Adjustments permitted for family composition. Medical underwriting and screening is prohibited i. Current rules phased out permissive deviations for the above items as of January 1, Age, geography, family size, and wellness activities.
Age brackets must be at least five-year increments from age 20 to ruth factor advanced skin care A wellness activity discount must reflect actuarially-justified differences in use or cost attributed to such programs, composite plan versus age gender tables. The difference between the highest premium rate and the lowest premium rate that insurers can charge small groups for the same health insurance plan is larger under rating bands than under adjusted community rating.
Table 2 summarizes requirements in the 37 states that have adopted rate band laws for insurers developing premiums for small employers. Rate bands apply to groups of three to Rating restrictions apply to groups of three to Rating restrictions apply to groups of two to Adjustment for health allowed only for carriers that used health status prior to June 1,