Understanding how health insurance is priced in California is critical when enrolling in a medical plan. Insurance carriers use standardized rating regions in California to contract with providers to set and file rates with the Department of Insurance. There are 19 rating regions that cover all counties and zip codes.
The following information is requested by health insurance carriers to determine the price you and your family members will pay:
- Date of Birth
- Home Zip Code
Individual and Family Plans (IFP): Member Rates
The health insurance rates for IFPs are based your age at the time of enrollment and home zip code. There is no rate adjustment based on health or pre-existing conditions.
Rates are subject to Affordable Care Act (ACA) rules:
- Each adult or parent is rated by age
- Three oldest children up to age 21 are rated
- Dependents older than age 21 are rated as adults
Small Group Plans: Member Rates
Employers with up to 100 employees are considered Small Group in California. Employees enrolling in medical plans through their employer will received rates based on their ages according to ACA rules. The employer zip code is used to determine the rating region, not the employee home zip code.
The employee zip code is used to determine whether coverage is available where they live. For example, an employee may wish to enroll in the HMO plan offered, but because they live outside of the service area, will not be eligible. Some HMO plans will use allow the use of the employer zipcode to enable enrollment.
Large Group Plans: Composite Rates
Employers with over 100 employees are considered Large Group in California. Insurance rates are blended by the insurance carrier and are not based on age. Everyone receives the same rates based on their family status:
- EE: Employee Only
- ES: Employee + Spouse
- EC: Employee + Child(ren)
- FA: Employee + Family
Self-Funded Plans: Composite Rates
Some employers implement Self-Funded Plans, where medical claims are paid by the employer, not the insurance company until the sum of all claims reach a pre-determined amount. Additional claims are paid by the stop-loss insurance that is purchased by the employer. These plans are available to both Small Group and Large Group employers. If a Small Group employer implements a Self-Funded Plan, they will use composite rates as if they were a Large Group.
This is one of the reasons employers consider Self-Funding because using composite rates can simplify benefits administration. The primary reasons for Self-Funding are reduced costs and flexible benefit design.