Adjusted Community Rating For Health Insurance

Screen Shot 2012-11-27 at 4.40.23 PM-resized-600One of the key aspects of the new health care law is the Adjusted Community Rating.

Currently, the health insurance industry uses gender, medical history, group size, and health status. These underwriting practices will be prohibited in 2014. With the new law, health insurers in the individual and small group markets will only be able to adjust premiums by family size, geography, tobacco use and age.

Premium ratings for age will be limited to three to one. This limits the amount an older individual will pay to no more than three times what a younger individual pays in premium dollars. Tobacco users, on the other hand, could see an increase in premiums up to 50%.

With these changes, it is projected that many small businesses and individual products will have substantial rate increases.

A small group that is young and healthy will see a large increase to offset the older and high-utilizing groups, where the high-utilizing groups may see only small increases. The individual market will experience vary large rates increase because there will no longer be underwriting.

So how do we offset these rate increases?

If you are have no access to a group plan, then applying for coverage through the exchange may reduce costs. The Indianapolis Federal Facilitated Exchange will have tax credits that can help reduce your monthly premiums if you qualify.

Many small companies may have tougher decisions. Small companies will be faced with 30-50% increases in group health insurance costs.  One option would be to look at the exchange for a possible tax credit on the group side. Another option would be a self-funded small group plan.

The third option would be to look at a defined contribution approach, in which an employer can determine up-front how much to contribute to the employees’ health insurance. This offers employees more choices and better choices than they currently have. Employees would no longer be limited to their employer’s “one size fits all” insurance choice.

Have more questions? You can contact us here and we can help get the right plan for you!






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