How are premium rates determined for small group employers?

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How are premium rates determined for small group employers?

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In 38 states, the law allows California small group health insurance companies to determine their initial premium rates for each company using a process known as medical underwriting. The other states make small group health insurance companies use processes known as modified community rating or community rating to determine their initial rates. When small group plans are medically underwritten, employees are asked to provide health information about themselves and their covered family members when they apply for coverage. When determining rates, insurance companies use the medical information on these health applications. Sometimes they will request additional information from an applicant’s physician or ask the applicants for clarification. If a company is unable to obtain information necessary to accurately determine the risk of a particular applicant, it will underwrite more conservatively, meaning that the assumption relative to the missing information will be negative rather than