“Community Rating” and Health Insurance Costs

With the advent of Healthcare Reform,/Obamacare/PPACA (or whatever you want to call it), there have been many new terms we need to get used to hearing.  Here’s a discussion on what Community Rating means.  First, some background.

As a Tampa insurance professional, many of my employer clients purchase small group coverage for their employees.  Regardless of the insurance company they choose, and I represent many, certain group characteristics are taken into consideration as the rates are developed by the insurance company.

For example, a group of young, predominantly healthy males working in a trade work classification, with most enrolled as individuals will generate a lower premium quote than a group of middle aged, tobacco using females working in a law firm with an increased number of employee and child(ren) enrollments.

In case you can’t guess, insurance carrier statistical risk data indicate the male group would have lower rates even if the businesses were next door to each other.  This is because:

  • males typically go to the doctor less frequently;
  • professionals in the legal field go to the doctor more frequently than others workers in general; and,
  • the employee plus child(ren) category has been expanded to include children up to age 26 and this allows otherwise unhealthy dependents to have coverage with a parent.

 Tobacco users increase risk of bad health and higher insurance claims frequency and severity.

Now, let’s look back to what Community Rating will mean to small groups.  Beginning in 2014, all insurers selling individual or small group products must use the Adjusted Community Rating (ACR). With ACR, insurers calculate the Community Rating and can adjust your cost based only on:

  • Your family size
  • Where you live
  • If you use tobacco
  • Your age

Insurers are limited in how much more they charge for these things. For example, they cannot:

  • Charge the oldest people they insure more than three times what they charge the youngest person
  • Charge tobacco users more than 50% more than what they charge people who don’t use tobacco

Will you be a winner or a loser in this scenario?  Do you think it is fair?  What are your thoughts on this new rule?  Will you purchase insurance differently?

If you need assistance determining which health insurance option is best for you and your family, please contact the Tampa Insurance office of SB Recommend today.

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