An insurer is underwriting a group medical plan for a company with 500 employees. Which underwriting approach is most typical for a group of this size?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Large groups — generally those with 101 or more employees in California — are priced using experience rating. The insurer analyzes the group's own past claims history, demographics, and risk profile to project future costs and set the premium. This is practical because large groups generate statistically credible claims data. Small groups, by contrast, are community rated under the ACA and cannot be experience rated. Experience rating vs. community rating by group size is the core distinction tested under AH-III.B.2 large-group underwriting considerations.
Why the other options are wrong
- B) Community rating applies to small groups under the ACA; large groups are experience rated on their own credible claims data.
- C) Guaranteed issue controls whether coverage is offered, not how the premium is set; large-group rates still reflect the group's claims experience.
- D) Individual medical underwriting is not used for group coverage; underwriting focuses on the group as a whole, not each member.
Memory hook
500 employees = 500 data points. Big groups are rated on their own history; small groups get community rates.