Community rating or individual rating for health exchanges

I was chatting with someone about health exchanges and they mentioned about building risk models at the individual level. Certainly that’s a good thing.  However, according to the Act, 2013 will have adjusted community ratings. Ratings will be based on a few factors at the individual level. The obvious variables are present: smoking and such. But the other variables will include things like age, family size and geography. This is for non-grandfathered (i.e. new) plans and will be in effect for companies less than 100 employees.

The ratios of pricing, the price ratio between the different risk areas, cannot exceed certain ratios. Of course, just because the law says this does not mean that there are not costs that will be incurred outside those ratios. This will lead, most likely, to higher rates in other plans such as employer plans. Perhaps this will force more employers to be self-insured area–which might not be a bad thing except that it creates an employment model that favors large companies and could force the squeeze on small companies. Perhaps the landscape will shift to one of large employers overall–the exact opposite of the markets the Act is suppose to help–individuals and small companies.

Leave a Reply