Group Health Insurance Rates in Phoenix, Arizona
Understanding how Group Health Insurance rates are calculated in Phoenix, Arizona can help an employer plan and predict future costs of employee benefits. The first factor in determining rates is to figure out what type of group health insurance contract you have; Fully Insured, Level Funded or Self Insured. Disclaimer: This information below is as of March 2019 and due to changing government regulation and the ways rates are calculated, things could change. Also, some insurance carriers have slightly different rules when determining eligibility and how rates affect employers and employees.
Fully Insured Plans:
Traditionally, most small and mid-size employers utilize Fully Insured plans and the employer and employee both pay a portion of the monthly premium. With Fully Insured Products, the insurance company collects a monthly premium and they take on 100% of the risk of the employee’s claims regardless of how high they are. Currently in Arizona, for any company with 2-50 full-time eligible employees, the only factors used to determine rates are employee demographics (home zip codes) and employee/dependents ages. Only eligible employees and dependents who are going to enroll in the health plan are used to calculate rates (if the employee/dependent does not want to enroll, their information is not used in the rate calculation).
Employee Demographic-Zip Codes: if most of the employees are located outside of the state or county where the policy is being written, the insurance company may ask for additional information. The rates could be higher or lower depending on where the employees live.
Under 10 Eligible/Enrolling Employees: each employee premium would be based on the employee/dependents age. This is called aged-based pricing; the younger employees pay less than the older employees. Also, as the employees become older, their rates will increase.
10 to 49 Eligible/Enrolling Employees: the employer/employee premium is based on a “composite” rate (also known as blended or average rates) and all employees regardless of their age pay the same amount. Dependent premiums are calculated the same way with all spouses paying the same “average” rate and dependent children paying the same rate.
Over 50 Eligible/Enrolling Employees: Employers with over 50 full-time eligible employees have a few additional underwriting factors. Carriers will start to underwrite based upon gender, participation levels, general health of the employees and rates of the current insurance carrier.
Many large national employers have made the decision to “self-insure” their health insurance plan. Internally, these plans are very complicated and figuring out how to calculate the annual cost of employee healthcare is very difficult. However, the concept is very easy; the employer acts as the insurance carrier and takes on the financial risk of higher than expected employee healthcare cost but gains the financial benefit if cost is less than expected. Because the employer usually contracts with national insurance provider networks, the employees notice no difference from a fully insured plan. Also, because the employer has a direct financial interest in their employee’s overall health, they usually participate in Health & Wellness Programs to control healthcare costs.
Level Funded Plans:
As the cost of healthcare continues to rise, employers and insurance companies are always trying to find ways to control cost. Level-Funded plans have begun to become very popular for employers with healthier employees but that are not comfortable self-insuring the risk. The best way to understand how level funded plans work is to understand that they have qualities of both Fully Insured and Self-Insured plans. Like Fully Insured plans, Level funded plans, once approved, have guaranteed 12-month contracts, premiums will not increase, and the employer takes on no additional liability if employee healthcare cost is higher than expected. However, unlike Fully Insured Plans, a level-funded plan bases it’s premium of the expected cost of the group to the insurance company, which means that in addition to the age and location of the group, your group’s health is used to calculate the premium. So, if you have a healthier than average group you could see significant cost savings vs Fully Insured. In addition, like Self-Insured plans, the employer could financially benefit from lower than expected employee claims. Because better than average employee health is so important to the longevity of the plan, insurance companies do ask employee/employer medical questions and will usually have other very sophisticated methods of determining the risk of any group of employees.
For more information on types of plans or how we help our clients design and implement their employee benefits program, please contact Rory Stone-Walsh at 602-218-4461 or firstname.lastname@example.org.
Blog Post Written By Rory Stone Walsh