Experience Rating (Group)
Setting group premiums partly on the group's own prior claims experience, used for larger groups; small groups are community rated.
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When underwriting a large group medical plan, an insurer is most likely to rely on...
The group's own claims history and experience, using experience rating rather than individual underwriting. — Large group medical underwriting is experience-based: the insurer studies the group's historical claims, demographic mix, and loss ratios to set premiums, because a group large enough produces credible claims statistics. Individual medical underwriting of each employee is unnecessary and, for large groups, generally not performed; individual risk classification matters far more in small group and individual markets. Considering one member's health, age, or hobbies would be contrary to the law of large numbers that governs large group pricing. This distinction between experience rating and individual underwriting is a core large-group underwriting consideration in the group medical expense outline.
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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.
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