Rating Structure

Insurance companies set rates based on assessing risk as we all know.

  • The richer the benefit plan the higher the premium. The more the cost within the plan in the form of deductibles, copays, and coinsurance (out of pocket costs) the lower the premium.
  • When a plan has very low out of pocket costs, the insurance company sets the rates for this plan higher than they need to be protecting them from adverse selection or getting all the high claimants on the plan.

Conversely, the insurance companies set rates for the higher out of pocket cost plans lower than they need to be.

Why? They figure employees who select these options are generally healthier and do not use the plan. This creates a large spread in premium between the higher and lower cost plans. Often this spread doesn’t make sense. The premium differential is more then the risk within the plan.

Ask yourself, which group do you want to be apart of? Obviously, we all want to be in the younger healthier lower premium group of the insured but how do we get there without saddling the employees with high out of pocket costs?

At NationalHR we work for our clients, not the insurance company. We have been successfully transitioning groups to the low-cost options while improving the benefit to the employee in the form of the lowest out of pocket costs around.