Smart Benefits: New Rating Requirements For Fairer Premiums
Monday, March 18, 2013
According to the final regulations, insurance premiums may only be based on four factors:
- Age (with a maximum surcharge of 300% for the oldest members)
- Tobacco use (with a maximum surcharge of 150% for tobacco users)
- Family status (i.e. individual or family coverage)
Rhode Island rating today
Currently, in Rhode Island, insurers use adjusted community rating to set a single rate for a plan. However, adjustments can be made based on factors like gender and age (insurers are prohibited from considering health status for individual and small group plans already). As a result of healthcare reform, a couple of rating factors used in the state will have to change:
- Gender will no longer be factor
Rhode Island’s 4:1 rating factor based on age is higher than what the federal government will allow and will have to be capped at 3:1
State Surcharge Option
Under the new rules, Rhode Island will be allowed to limit, or prohibit, the age and/or tobacco surcharge.
Unless the state prohibits the age and tobacco surcharge, each family member must be rated individually, with their costs then aggregated (if a family has more than three children, only the premiums of the three oldest children who are under age 21 will be considered).
For states who allow the tobacco surcharge, small group plans must offer smoking cessation wellness programs to provide a way to avoid the surcharge. Insurers will be able to collect back premiums if someone misrepresents their smoking status.
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