Question

Explain the meaning of community rating and experience rating. Explain what is meant by adjusted community ratings.  

Answer 1

Community rating is is a term associated with health insurance. Community rating is a type of insurance pricing that prohibits medical writing and insurer in the same geographic area should pay the same premium regardless of the health status. A person's age does not determine the level of premium they pay.This insurance does not discriminate against it's members on age, health status or claim history. In community rating high risk groups (sick,old people) are averaged out with low risk group(healthier people) .The expenses of all participants are pulled together and spread out equally among all the insurance. Here health insurance is charge based on the people within a given area .

Experience Rating:In this system, the individual has their premium based on their condition or other risk associated with that person.The benefit of this system is to allow the individual to pay and functions according to their disease.Experience rated polices offer lower premium for healthier individual but higher cost for sick.Experience Rating is most commonly associated with worker's compensation insurance.Employers is charged a premium that reflect their risk .

Adjusted community is premium where the insurer charge a particular group an amount which is derived by modifying specific demographic factors like age, gender and family. Premium based on health conditions of an insured individual is not allowed.Here the premium is based on factors like age, family size, geographic area and tobacco use.