Community Rating

On January 1, 2016, due to Affordable Care Act (ACA) reforms, some employer groups will need to begin using community rating when setting health plan premium costs. This requirement previously applied to employers with no more than 50 employees, but in 2016, it will expand to include employers with up to 100 employees.

Community rating is the idea that, within a geographic specific region, the premium rate is nearly equal for everyone, no matter their illness history or individual health risks. Certain factors will affect the premium costs, including:

  • Health care costs in a region
  • Family size and age
  • Pool’s health risks

In addition, under this ACA reform, a plan’s highest premium rate cannot cost more than three times the plan’s lowest premium rate, which should be lower than past rate differences. However, employers can charge higher premiums for employees not participating in wellness programs, up to 30% more.

Unfortunately, the community rating does have its disadvantages. For example, groups consisting of mainly young or healthy employees may experience higher premiums since they essentially will be subsidizing the older or not as healthy employees of another group. Likewise, male employees may have to pay higher premiums to subsidize female employees because this new rating system will not allow gender-based premium disparities and women have tended to pay higher premiums due maternity costs.

If you have questions about this or any other issue, be sure to contact your BPA representative.