Community rating is a concept usually associated with

health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among m ...

, which requires health insurance providers to offer health insurance policies within a given territory at the same price to all persons without medical underwriting, regardless of their health status. ''Pure'' community rating prohibits insurance rate variations based on demographic characteristics such as age or gender, whereas ''adjusted'' or ''modified'' community rating allows insurance rate variations based on demographic characteristics such as age or gender.

Concept

Community rating, as a basis for premium calculation, is fundamentally different from the usual method of determining insurance premiums, i.e. ''risk'' rating. In a risk rated insurance market, an insurer calculates the premium payable by a potential policy holder in order to enter into an insurance contract on the basis of various factors particular to that individual, such as the risk of a claim occurring, and the value of any such claims during the term of an insurance policy. In a community rated market, the insurer may not calculate premium on the basis of the risk factors attaching to the particular person wishing to purchase an insurance contract, but rather the risk factors applying to all persons within the market as a whole. Thus, in a community rated market, the insurer evaluates the risk factors of market population, and not those of any one person when calculating premiums. Some form of risk equalization also often exists in a community rated system. * Health insurers vary premium rates based on ''case characteristics'', such as: ** benefit design ** family composition ** demographic characteristics: *** age *** gender *** geographic area *** occupation *** industry ** lifestyle factors: *** tobacco use *** weight ** health status and claims history * Community rating — prohibits insurers from varying rates based on health status or claims history ** Pure community rating — allows insurers to vary rates based on benefit design and family composition only *** Limited variation in rates by geographic area is sometimes included in the pure community rating category (e.g.

New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...

) ** Adjusted (modified) community rating — allows insurers to also vary rates based on demographic characteristics (e.g. age and gender) and lifestyle factors (e.g. tobacco use) * Guaranteed issue — requires insurers to issue insurance to any eligible applicant without regard to health status or other case characteristics

Occurrence

Community rating of ''supplemental'' private health insurance: *

Australia Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. With an area of , Australia is the largest country by ...

Ireland Ireland ( ; ga, Éire ; Ulster-Scots: ) is an island in the North Atlantic Ocean, in north-western Europe. It is separated from Great Britain to its east by the North Channel, the Irish Sea, and St George's Channel. Ireland is the s ...

— lifetime community rating of private hospital insurance supplemental to universal publicly financed hospital insurance Community rating of ''basic'' private health insurance: *

Netherlands ) , anthem = ( en, "William of Nassau") , image_map = , map_caption = , subdivision_type = Sovereign state , subdivision_name = Kingdom of the Netherlands , established_title = Before independence , established_date = Spanish Netherl ...

— age and gender rating ''illegal'' = pure community rating; individual guaranteed issue ** individual mandate with low-income government subsidies for 40% of households *

Switzerland ). Swiss law does not designate a ''capital'' as such, but the federal parliament and government are installed in Bern, while other federal institutions, such as the federal courts, are in other cities (Bellinzona, Lausanne, Luzern, Neuchâtel ...

— age and gender rating ''illegal'' = pure community rating; individual guaranteed issue ** individual mandate with low-income government subsidies for 40% of households *

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

** age rating limited to 3:1 (300 percent); gender rating illegal; individual guaranteed issue ** individual and employer mandates with government subsidies for individuals with income up to 400% of the

Federal Poverty Level In the United States, poverty has both social and political implications. In 2020, there were 37.2 million people in poverty. Some of the many causes include income inequality, inflation, unemployment, debt traps and poor education.Western, ...

- those with lower incomes pay lower costs. ** tobacco use can increase premiums up to 1.5:1, while geographic factors can also affect price.

References

{{Reflist, 2 Health insurance