By Fred J. Meijering, GAIN
Welcome to the third in our eight-part series on GAINing insight into the mysteries of health insurance, brought to you by AVB partner Group & Affiliate Insurance Network, or GAIN. This month’s column uncovers the variables that determine your health insurance premium.
There are three broad coverage sectors that use different determinants to set the price of health insurance. They are the Federal Exchange (healthcare.gov); the fully-insured market; and the self-insured/level-pay market. Some of the criteria employed by these three approaches are regulated by law. What follows is a brief look at each.
Age: Premiums can be up to three times higher for older people than for younger ones.
Location: Where you live has a big effect on your premiums. Differences in competition, state and local rules, and cost of living account for this.
Tobacco use: Insurers can charge tobacco users up to 50 percent more than those who refrain.
Individual vs. family enrollment: Insurers can charge more for a plan that also covers a spouse and/or dependents.
Plan category: There are five plan categories under the Federal Exchange: Bronze, Silver, Gold, Platinum, and Catastrophic. The categories are based on how costs are shared between you and the plan. Bronze plans usually have lower monthly premiums and higher out-of-pocket costs, while Platinum plans usually have the highest premiums and lowest out-of-pocket costs.
Depending on the size of the group, fully insured plans use age, location, enrollment level and plan category to determine premiums. For larger groups, that data will be used in addition to claims history.
The rules lighten up a little for health plans within this category. Plans can use age, location, gender, enrollment level, plan category and claims history, and may also require employees to complete an application that requires current and past health status for the individual and his or her dependents. Note: This is not to preclude enrollment on the basis of pre-existing conditions, but rather as a way to underwrite and specifically price the group based on anticipated claims.
Although there may be subsidies and rate relief for those who qualify for the Federal Exchange based primarily upon income, it is generally less costly to use an employer plan when the employer pays a part or all of the premium. For groups that are generally healthy, there may be solid savings in the self-insured/level-pay category. While there may be other considerations, a good value can often be found with those options for the right group.
Once again, we at GAIN are grateful to be a part of the AVB/BrandSource team. Tune in next month for Part IV, in which we explore the costs for various types of health insurance.
Fred J. Meijering is a GAIN Health Advisor and Captive Manager for Davidson Insurance Services in Addison, Texas. You can reach him at Fred@davidsoninsservices.com.