Experience Rating

The process of setting rates partially or in whole on evaluating previous claims experience for a specific group or pool of groups. The rating system by which the Plan determines the capitation rate or premium rate is determined by the experience of the individual group enrolled, based on actual or anticipated health care use by the specific group of insureds. Each group will have a different rate based on utilization. This system tends to penalize small groups with high utilization. A method of adjusting health plan premiums based on the historical utilization data and distinguishing characteristics of a specific subscriber group, such as determining the premium based on a group’s claims experience, age, sex or health status. Experience rating is not allowed for federally-qualified HMOs.