Community Rating

Community Rating (pronunciation: /kəˈmjuːnɪti ˈreɪtɪŋ/) is a system used in health insurance to set premiums. It is a method that takes into account the collective health status and risk factors of the people in a specific community to determine the cost of insurance.

Etymology

The term "Community Rating" is derived from the English words "community" and "rating". "Community" (from Latin communitas) refers to a group of people living in the same place or having a particular characteristic in common. "Rating" (from Old Norse rata) means to assess something in respect of quality, standard, or performance.

Definition

Community Rating is a rule in health insurance that prevents insurance companies from varying premiums within a geographic area based on age, gender, health status or other factors. This means that all residents of a certain area would pay the same premium for the same health insurance policy, regardless of their individual health status.

Types of Community Rating

There are two main types of community rating: pure community rating and adjusted (or modified) community rating.

Pure Community Rating - Under this system, all members of a particular community pay the same premium, regardless of their individual health status, age, gender, or other factors.

Adjusted Community Rating - This system allows for price variation based on specific demographic factors such as age and gender, but not on health status.

Related Terms

Risk Pool - A group of individuals whose medical costs are combined to calculate premiums. In a community-rated system, the risk pool includes all individuals in the specified community.

Health Insurance - A type of insurance coverage that pays for medical and surgical expenses incurred by the insured.

Premium - The amount that must be paid for your health insurance or plan.

Underwriting - The process of evaluating the risk of insuring a home, car, driver, or individual in the case of life insurance or health insurance, to determine if it's profitable for the insurance company to take the chance on providing insurance.