After January 1, 2014 individual health and small group (2 to 50 employees) health insurance is calculated on a community rated basis. Essentially a rate table is established for each insurance product with a corresponding rate amount for each year of age for a person enrolled. There is a rate for someone at age 25, and slightly different rate for age 26 and so on for each year of age. For carriers applying the pure age rating approach it is a matter of telling an individual your rate at this age is "X" amount of dollars, for someone covering dependents it is a process of adding the rate for the subscriber, their spouse and/or dependent children (up to a maximum of 3 dependent children) for their various ages and that it the total rate for the individual plus dependents. Dependent children over age 21 are added to the cost as an adult. This is the individual insurance carriers and most small group carriers are now calculating their rates.
As you might guess, for small businesses this can result in employees with the same level of enrollment coverage (e.g. - Employee Only) having different rates which is a headache from an accounting and employer contribution calculation perspective. Some small group carriers do the age calculation that I have described earlier, divide the total by the amount of enrollees in each coverage class (e.g. - Employee Only, Employee+ Spouse, Family) and come up with a composite rate that yields a uniform rate for each level of enrollment. How the insurance carrier has filed their products with your state insurance commission will determine which style of rates you see from different insurance carriers. However, the underlying rate methodology is the same.
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As you might guess, for small businesses this can result in employees with the same level of enrollment coverage (e.g. - Employee Only) having different rates which is a headache from an accounting and employer contribution calculation perspective. Some small group carriers do the age calculation that I have described earlier, divide the total by the amount of enrollees in each coverage class (e.g. - Employee Only, Employee+ Spouse, Family) and come up with a composite rate that yields a uniform rate for each level of enrollment. How the insurance carrier has filed their products with your state insurance commission will determine which style of rates you see from different insurance carriers. However, the underlying rate methodology is the same.