What is Community Rating?


This explains how community rating works to control premium creep and relate cost to the people’s ability to afford it

Remarkably, in virtually all other industrialized nations, this issue is hardly ever raised. Community rating there has long been widely accepted and is unlikely to be abandoned in the foreseeable future.

The health systems of Switzerland, the Netherlands and Germany are frequently cited as potential models for a reformed American health system. All three countries offer their citizens a wide choice of health insurers — none of which is a government-run health plan. Yet in all three countries full community rating is de rigueur.

Swiss citizens, for example, are required to purchase insurance coverage for a comprehensive health-benefit package from a large menu of private health insurance companies that compete for customers on the basis of the premium they charge for that coverage.

Profits cannot be earned on insurance for the basic package. Premiums do vary among competing insurers, but for a given insurer they can vary only by the deductible and coinsurance rates of the different policies. Neither the individual’s health status nor age affects the premium charged the individual by a given insurer. Health insurers ending up with an older or sicker enrolled risk pool then receive compensation from a risk-equalization fund.

Similarly, Dutch citizens are required to purchase insurance coverage for a comprehensive benefit package from a menu of private for-profit or not-for-profit insurers.

via How the World Balances Health Care Risk – Economix Blog – NYTimes.com.

This is another concept not explained to the voting public, but it seems like it is a key component of controlling cost.