Posted by Ted (64.12.104.21) on May 08, 2001 at 23:04:43:
In Reply to: Getting it started posted by DaveH on May 08, 2001 at 22:37:55:
Basically, groups pretty much need at least a single employee for the companies to accept a formed group. Plus, it would be cost prohibitive because of the way premiums are calculated (in a nutshell, they do it by geographical region, which seems like an impossiblility since we're so spread out across the world -- and country for the purpose of insurance. Not to mention that OUCH isn't employing anyone.). So, we'd have to be calculated by the average of how much we'd be using the service. And since we're a specialized group based on a medical problem, the premiums would be outrageously steep. Doc Greg pointed this out to me and it was further confirmed by this article I found:
HTML1DocumentEncodingutf-8Small business group health insurance: Frequently
asked questions
How does the insurance company determine our group's premium?
Insurance companies use one of two methods to calculate your premium: medical underwriting
or community rating. The method used depends on the rules in your state.
Medical underwriting means each employee is considered individually, so that the overall health
of everyone in your group determines the final premium. For very small employers, premiums
can go up if you have one employee with a history of chronic illness (such as diabetes) or with a
catastrophic illness.
The good news, though, is a group cannot be turned down because of the health of one
individual, nor can one person be denied coverage when the rest of the group has been accepted.
That's part of the Federal Health Insurance Portability and Accountability Act of 1997 (HIPAA),
which also prevents insurers from charging different rates to individuals in the same group based
on their health status. Insurers, however, are allowed to charge different rates within the group
based purely on age or gender. Some states limit the extent to which insurers can "rate up," or
increase premiums above the average, for groups with poor medical histories.
The second method, community rating, is the standard for setting health insurance premiums in
some states and eliminates health status from the list of factors that insurance companies are
allowed to consider when they set group insurance premiums. Pure community rating, rarely
used, means that everybody in a particular geographic area pays the same premium for health
insurance.
"Pure community rating is quite uncommon because it's a good deal for older people, who would
otherwise pay higher premiums, but not for people who are younger," explains Janet Trautwein,
director of federal policy analysis for the National Association of Health Underwriters. "Most
states don't use pure community rating because younger people feel they can't afford it, and drop
out of the health plan." When younger people drop out of the group plan, only the sick and the
elderly remain, which is not a boon for insurance companies and can cause them to cease
operations in that state.
Modified community rating, however, is a common underwriting procedure among states that
allow it, and depends on the employer's ZIP code to determine the group's premium. "If you
consider that most employees live within a reasonable distance of work, the geographic area used
to calculate premiums is much smaller. In most cases, insurers use the employer's ZIP code,
unless there are employees who live far away or completely out of state. In that instance, they'll
use the employee's ZIP code," Trautwein says.