Which statement correctly describes how rates for a LARGE group health plan are typically determined?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Large groups are rated on their own claim experience — a method called experience rating. Because a large group has enough lives to make its historical claims statistically credible, the insurer can predict future claims from that group's own record and price accordingly. Small groups, by contrast, generally cannot rely on their own experience, so they are community-rated or pooled. The exam tests the principle that group size determines which rating method is reliable. The insurer may also blend the group's own experience with manual rates to smooth out random fluctuation, but the group's claims remain the dominant factor as the group grows in size.
Why the other options are wrong
- B) Individual medical-history rating of each member is not how group plans are priced; the group is the unit of rating, and members are not medically underwritten.
- C) Large group rates vary by each group's claims, age/gender mix, and plan design; they are not uniform statewide.
- D) Rating is based on the entire group's experience, never on a single member's health.
Memory hook
Big group = your own claims write the rate card. The larger the group, the more its own history speaks.