Small Group Employers – How Are Premium Rates Determined?

Are you shopping around for health insurance? You may be wondering where the various health insurance companies are getting their numbers from.

In most states, laws permit small group health insurance companies to determine their initial premium rates for each client company through medical underwriting. Medical underwriting uses medical or health information to evaluate the applicant(s) applying for health insurance coverage. As part of the process, each person’s health information is used to determine whether or not the person (or group) will be provided with coverage, and what the premium rate is going to be.

In other states, small group health insurance companies use a process called modified community ratings to determine their initial rates. In states where this is enforced, modified community ratings require health insurance providers to offer policies at the same exact rate to all persons within a given geographic territory.

Most small group employers have to go through the medical underwriting process, because it is a much more common practice than modified community ratings. Premium charges are directly affected by claims history and your employees’ existing health attributes and habits … do you have employees that are overweight? Do you have employees that smoke? These traits could potentially increase the health insurance company’s risk of taking on your group, which therefore will increase the premium rate.

At Employer Solutions Plus, we represent the “best of” in health insurance options and employee benefits. This allows us the flexibility to customize a cost effective solution to meet the individual needs of our clients. If you’re shopping around, and not seeing the numbers you expected, please contact us for additional insight and help.