When looking at the topic of Group Health Insurance the number one concern is always the cost of coverage; namely, how expensive is the policy?
Myriad factors play their part in group health insurance premium calculations. From the benefits provided by the policy, the level of deductible chosen for membership classes, and even the coverage areas of the plan, a number of variables will ultimately play a role in the overall cost of the policy.
Arguably the most important consideration when calculating a group health insurance premium is are the demographics of the group being insured. Simply put, the more members there are in the group, and the older the age of those members, the more expensive the policy will be.
For example, a the health insurance premium for a group of 10 individuals who are each 29 years old will normally be less expensive than the premium for a group of 10 individuals who are each 35 years old given the same benefits and policy coverage area. Similarly, the insurance premium for a group of 20 individuals aged 29 years old will normally be more than that for a group of 10 individuals aged 29.
It is for this reasons that CCW can provide tailored policies which will enable the core stakeholders of the policy to define different classes of coverage. For instance, all employees under 30 years of age may receive 1 type of coverage whilst all employees over 30 years of age will receive a 2nd type of cover.
Generally, however, the simple rule of thumb is that the more members being covered under the plan, and the higher the average age of the group, the more expensive the premium of the policy.
Outside of the census of the group, one of the other major factors in the calculation of a group’s health insurance premium is the plan’s area of coverage.
The reason that Area of Coverage is such an important variable is fairly simple: medical costs are higher in some countries than in others. As such, choosing a plan which includes coverage in high cost countries means that the policy will be more expensive than if those locations were excluded.
The prime example here is found in Worldwide policies, vs Worldwide policies excluding the USA. Choosing to include America in a group’s health insurance coverage area will mean a higher overall premium than if the USA was excluded. This is due to the fact that the United States has the highest overall costs of medical treatment of any country on earth.
More information about this topic can be found by clicking Coverage Areas. However, the simple takeaway from this is that it can often pay to be selective in the coverage area provided by the policy, and excluding certain locations from the coverage can yield significant savings in the policy premium.
It should come as come as no surprise that more comprehensive group medical insurance plans will cost more than less comprehensive policies. That is to say, a company who purchases a health insurance plan which provides more benefits should expect to pay a higher premium than a company who purchases a health insurance plan which offers just the bare amount of coverage.
For organizations looking to provide only a basic level of cover to employees and group members, an inpatient-only policy with a high deductible can be an effective way of containing costs on the plan. However, it is important to realize that any additional coverage benefits on top of a plan’s inpatient protection will normally a sharp spike in the cost of the policy.
If a group is interested in offering more expansive coverage options to group members, an efficient way of ensuring price containment is found in the addition of deductibles – more details of which can be found by clicking Group Health Insurance Deductibles.
For more information about the policy benefits available under group health insurance plans please click Group Health Insurance Coverage.
One of the least understood aspects of Group Health Insurance premium calculations is the difference between the different types of ratings insurance companies use when looking at the cost of coverage. Choosing between a Community Rating or an Experience Rating can have a significant impact on the overall cost of the policy, but will also have an effect on the consistency and longevity of the plan’s pricing.
A Community Rating will mean that each individual in the group will pay the same premium as all other policyholders of the same age, with the same policy benefits, and the same coverage area. This is possible because the insurers will calculate the estimated average medical costs for a specific community, and then apply that premium across the entire community.
In the case of groups that have a community rating, the community calculated premiums for the entire group are then added up to get the overall total.
An Experience Rating will mean that the premium for the policy is calculated based on the claims-experience the group has under the policy. This means that the policy can often start with a very affordable premium, but will increase over time as claims are made and the group’s “experience” begins to develop.
For more information on these two types of premium rating, please click Group Health Insurance Ratings.
If you would like to enquire about the different factors involved in calculating the premium of a group health insurance policy, please Contact Us Today to arrange a no-risk, no-obligation consultation with a CCW Global Insurance Broker.
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