The major provisions of the Affordable Care Act are right around the corner. The way premiums are rated will be a major factor in reshaping the health insurance market.
As one example, health insurers in the Individual and Small Group markets must treat the entire market as a single risk pool when setting rates.
In addition, differences in premiums based on health status are not allowed. Insurers must charge sick people and healthy people the same premium.
Health plans under reform can vary premiums based on four allowable rating factors:
• Age – limited to a 3:1 ratio. This means that the rate for a 64-year-old can’t be more than three times (i.e., 300 percent) the rate for a 21-year-old.
• Family composition with member-level rating applied. Instead of composite rating, each family member will be rated individually based on his/her age.
Carriers can charge only for the three oldest children in the family who are under 21.
For example, let’s say the Moore family has mom, dad and four children under age 21. The Moore family’s rate would include: mom + dad + the child rate x 3 (age 0–21).
Now if the oldest of the four children in the Moore family is over 21 years old, the rates would include: mom + dad + 23-year-old + the child rate x 3 (age 0–21).
• Geographic rating area.
• Tobacco use – limited to a 1.5:1 ratio.
Health Net has opted against rating for tobacco, so we will not be factoring that into our rates.
There may be some variations in different states, depending on how rating works today. In California and most states, the rating structure described will be effective on or after January 1, 2014.
Preparing for 2014 is no small task. Health Net is your go-to partner, here to help you work through the changes ahead. Just call your Account Executive.