Page 332 - Ebook health insurance IC27

The Insurance Times

as "risk factors") as age, sex, occupation, health status (i.e. medical history), smoking
status, etc.

Individual (manual) rating is also used in calculation initial rate for groups with no past
experience.

Group rating
Some insurers use experience rating methods for calculating group rates. With experience
rating, insurer considers the actual group experience in determining the group's premium
rate. It is believed by some to be the most cost-effective way to reflect the general
health of a group in the rate that is charged.

Small groups are treated like individuals (although some use an experience factor to
some extent).

Rating process
This refers to the steps used to determine a premium rate for a particular group based
on the amount of risk that group presents. Items that generally go into the rating process
include age, sex, type of industry, benefits, and administrative costs.

Q. How are individual premium rates calculated?
A. Individual premium rates depend on a variety of factors, including, but not limited to:
n The extent of cover
n Individual risk factors such as age, state of health, smoking status, etc.
n The cost of claims paid by the insurer throughout the year. If this rises, the premiums

could too.
n The size of the excess, level of coinsurance

336 Guide for Health Insurance