ASSIGNING
RATES FOR GROUP HEALTH PLANS IN
CALIFORNIA
How Does the Health Insurance Carrier Assign Rates?
Question. When medical premium rates are assigned is there any way to get a better deal?
Answer: State of California regulation AB 1672 allows the regulated carriers incorporated in our great state to increase or decrease insurance premiums plus or minus 10% off standard rate. This is called “rate adjustment factor”, or R.A.F. in the insurance community of group insurance brokers, agents, underwriters, membership, actuaries etc.. Each year upon anniversary the California health insurance carrier factors the claims and overall risk of the employee membership and assigns the appropriate number to balance healthy groups vs. expensive groups. This number is in addition to the annual rate increase or decrease the health insurance carrier assigns overall based on zip code, age, enrollment type, gender, and claims submitted overall by the Employer groups in the area region.
What the carrier cannot do is raise or lower the premiums of the California Small Business beyond the 10% margin and the overall increase a group might receive which is standard to the charted rates for all groups in the zip code. Health insurance is not like Auto Insurance or Home Insurance in this regard. It cannot be canceled or increase dramatically (unless you consider the 10% delta dramatic) because you happen to use your plan frequently or submit large, expensive health insurance claims.
