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Insurance · Individual and Group Coverage

What is 'experience rating' for group health insurance?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

Setting the group's premium rate based on the group's own claims history rather than community-wide data — groups with better claims experience pay less

  1. A A discount for healthy employees
  2. B Rating based on years of experience in the industry
  3. C A rating for the insurance agent's performance
  4. D Setting the group's premium rate based on the group's own claims history rather than community-wide data — groups with better claims experience pay less

Why this is the answer

Experience rating sets group premiums based on the group's own historical claims data. Large groups (100+ employees) are typically experience-rated — their premium directly reflects their own utilization. Small groups (under 50-100 employees) are typically community-rated — their premium reflects the broader community's experience because their own data is statistically insufficient to predict future claims. Experience rating creates incentives for large employers to manage employee health and claim costs. The ACA created community rating requirements for individual and small group markets.
Source: Health Insurance Exam, Experience Rating

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About this topic: Individual and Group Coverage

Individual and group coverage questions cover how group plans are underwritten and administered, eligibility and enrollment, conversion and continuation rights (COBRA), and how individual policies differ. This is one of 7 Health Insurance questions on individual and group coverage, each with a full explanation on a single study page.

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