Smart Benefits: New Rating Requirements For Fairer Premiums

Smart Benefits: New Rating Requirements For Fairer Premiums

To meet healthcare reform requirements, beginning in 2014, health insurance rates for individual and small group plans (non-grandfathered) will be calculated differently to provide for fairer premiums.

According to the final regulations, insurance premiums may only be based on four factors:

• Age (with a maximum surcharge of 300% for the oldest members)
• Tobacco use (with a maximum surcharge of 150% for tobacco users)
• Family status (i.e. individual or family coverage)
• Geography
   

Rhode Island rating today

Currently, in Rhode Island, insurers use adjusted community rating to set a single rate for a plan. However, adjustments can be made based on factors like gender and age (insurers are prohibited from considering health status for individual and small group plans already). As a result of healthcare reform, a couple of rating factors used in the state will have to change:

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• Gender will no longer be factor
• Rhode Island’s 4:1 rating factor based on age is higher than what the federal government will allow and will have to be capped at 3:1
   

State Surcharge Option

Under the new rules, Rhode Island will be allowed to limit, or prohibit, the age and/or tobacco surcharge.

Unless the state prohibits the age and tobacco surcharge, each family member must be rated individually, with their costs then aggregated (if a family has more than three children, only the premiums of the three oldest children who are under age 21 will be considered).

For states who allow the tobacco surcharge, small group plans must offer smoking cessation wellness programs to provide a way to avoid the surcharge. Insurers will be able to collect back premiums if someone misrepresents their smoking status.

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.