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What is community rating and how will it affect rates?July 17, 2013
Health care reform requires health insurance companies to offer coverage to all people and businesses. This is called guaranteed issue.
Along with guaranteed issue, health care reform requires health insurance companies to move to modified community rating for individuals and small businesses. This is the practice of charging premiums that aren’t based on the health history of the individual or business applying for coverage. Insurance companies must base rates on the cost of care for a group of people (a risk pool). By pooling a group of people together, healthy people help balance health care costs for people who aren’t healthy. The risk and cost is shared among everyone in the pool.
New laws for community rating
Health care reform has introduced new rules for community rating, which is why it’s called modified community rating. Insurance companies can’t base rates on any person’s health history. Instead, rates can be based on age, tobacco use*, family size and location. The law limits how much coverage can cost. The highest rate can’t be more than three times the lowest rate for a plan.
How it works
All Individual customers in a state will be in one risk pool and all Small Group customers will be in another risk pool. In addition:
- States will be able to keep individual and small business risk pools separate.
- Rates will be based on the health risk of the entire pool. Then those rates can vary based on age, tobacco use*, family size and location.
These laws prevent insurance companies from creating separate risk pools that charge higher or lower rates.
The impact to plans
Most of our health plans will change in 2014 to comply with health care reform. That may cause the rates of some of our plans to go up. We’ll work with you and your clients to find a health plan that meets their needs. We will offer 100% preventive coverage, results-driven health and wellness programs to small businesses, and integrated cost and quality tools to help members understand their costs.
Find out more about health care reform
*Tobacco use may not affect the rates in some states.