Insurance Broker | Financial Consultant, Lawrence Insurance Consulting, Southern New Jersey
Health insurance issuers (i.e., licensed entities) in the individual and small group markets must consider all enrollees in all non-grandfathered health plans issued in a particular state to be members of a single risk pool when developing rates and premiums for plan years (in the individual market, policy years) effective on or after Jan. 1, 2014.
Each issuer must have one individual market pool and one small group market pool in each applicable state. States may choose to require issuers merge these pools. The final rule also requires:Each issuer in a state will have an index rate for each of the individual and small group pools for each plan year (policy year, in the individual market). The index rate is based on the total combined claims costs for providing essential health benefits within the single risk pool. If there is not enough claims data available, issuers may use any reasonable source of claims data, including claims from grandfathered business. There may be market-wide adjustments for risk adjustment and reinsurance programs as well as Exchange user fees.
Premium rates for a particular plan may vary from the market-wide index rate only by several enumerated factors. For example, issuers may modify the market-wide index rate at the individual plan level to adjust for administrative costs (other than Exchange user fees), so long as actuarially justified.
Plan-specific adjustments to the market-wide index rate must not reflect differences in health status or risk selection. Issuers are expected to use pooled allowable claims data as a basis for calculating the plan-specific actuarial value instead of using the HHS actuarial value calculator.
Fair Health Insurance Premiums (applies to non-grandfathered plans)-
Health insurance issuers may vary the premium rate charged to a specific non-grandfathered individual or small group from the rate established for that particular plan only based on the following factors: family size (individual or family), geography (rating area), age (within a ratio of 3:1 for adults) and tobacco use (within a ratio of 1.5:1).
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Each issuer must have one individual market pool and one small group market pool in each applicable state. States may choose to require issuers merge these pools. The final rule also requires:Each issuer in a state will have an index rate for each of the individual and small group pools for each plan year (policy year, in the individual market). The index rate is based on the total combined claims costs for providing essential health benefits within the single risk pool. If there is not enough claims data available, issuers may use any reasonable source of claims data, including claims from grandfathered business. There may be market-wide adjustments for risk adjustment and reinsurance programs as well as Exchange user fees.
Premium rates for a particular plan may vary from the market-wide index rate only by several enumerated factors. For example, issuers may modify the market-wide index rate at the individual plan level to adjust for administrative costs (other than Exchange user fees), so long as actuarially justified.
Plan-specific adjustments to the market-wide index rate must not reflect differences in health status or risk selection. Issuers are expected to use pooled allowable claims data as a basis for calculating the plan-specific actuarial value instead of using the HHS actuarial value calculator.
Fair Health Insurance Premiums (applies to non-grandfathered plans)-
Health insurance issuers may vary the premium rate charged to a specific non-grandfathered individual or small group from the rate established for that particular plan only based on the following factors: family size (individual or family), geography (rating area), age (within a ratio of 3:1 for adults) and tobacco use (within a ratio of 1.5:1).