Community Rating
Setting one premium rate for all enrollees in a geographic area regardless of health status, age banding only within limits, as ACA-compliant plans require.
Drill all 803 terms as flip-card flashcards in the Exam Engine →
Practice This Concept
Community rating, the method typically used for small groups, means that premiums are:
Based on the combined experience of all covered persons in a defined geographic area, not on one group's claims — Under community rating, the insurer pools the experience of all insureds in a rating area and charges rates based on that pooled experience, so the healthy and the sick share the same underlying rate structure. The ACA requires individual and small-group plans to use a modified community rating that may vary premiums only by limited, specified factors such as age, tobacco use, family size, and geographic area, and never by health status or claims history. This contrasts with experience rating used for large groups, where a single group's own claims dominate its premium. Community rating therefore protects small groups with sicker members from unaffordable individual pricing.
National insurance concept
Underwriting for a large group (101 or more employees) relies most heavily on:
The group's own claims experience and demographic composition — For large groups, the insurer prices coverage primarily on the group's own claims experience, industry classification, and demographic characteristics such as age and gender distribution. Because the group is large enough for credible loss data, individual medical underwriting is neither necessary nor permitted. This is a distinct underwriting approach from small groups, where community rating and guaranteed issue dominate. The distinction is covered under the large-group underwriting considerations in AH-III.B.2.
National insurance concept
Practice all medical expense questions →