Community rating versus experience rating: how carriers price your group
Smaller groups are priced mostly on who they are, while larger groups can be priced on their own claims. Knowing which applies tells you what you can influence at renewal.
Six Parts of Group Rating.
Alternative Funding With Stop-Loss
How self-funding with stop-loss compares with community-rated plans.
Level-Funded Compared With Fully Insured
Level-funded compared with fully insured.
Stop-Loss and Claims Volatility
Why claims swings matter to rating.
Self-Funded and Stop-Loss Renewals
What to expect at a self-funded renewal.
From Renewals to Results
How renewals turn into results.
What Your Broker Should Do for You
What your broker should do about pricing.
Knowing which lever you actually have at renewal.
When a group is community rated, the renewal reflects the carrier’s expectations for similar groups, so your own claims experience has little direct influence. Your levers are plan design, contribution strategy and the choice of carrier. For a group that is experience rated, your own claims history drives the rate, so claims management and the data behind your renewal matter far more.
Many groups sit between the two, with some credibility given to their own experience. Ask your carrier how your renewal was built and what share is based on your group. That answer tells you where to spend time: shopping the market, managing claims or both. We help employers read the answer and decide.
Questions About Rating Methods.
Plain answers for HR, finance and deal teams.
What Is Community Rating?
Pricing based on factors such as age, tobacco use and area, and not on the group’s own claims history.
What Is Experience Rating?
Pricing that reflects the group’s own claims, so good results can lower the renewal and bad results can raise it.
Which Applies to My Group?
Generally smaller groups are rated by community factors and larger groups by their own experience, but carriers set the lines, so ask.
Can I Influence My Renewal?
In an experience-rated group, yes, through claims management and funding choices. In a community-rated group, plan design and carrier choice matter more.
Can a Small Employer Use This?
Often yes, though the rules and costs differ by size. Send us your situation and we will say what applies.
Do the Rules Change Each Year?
Limits and some requirements change annually, so check current figures on our limits and compliance update pages.
Who Should We Involve?
Your counsel or tax advisor on legal points, finance on cost, and a benefits advisor on design and vendors.
Can You Review What We Have Now?
Yes. Send the plan documents and renewal and we will show where things stand and what options exist.
What Should We Send You First?
Your current plan summary, the renewal, and any policy or vendor agreements that apply.
How Do We Start?
Send your renewal and the timeline for the decision. We will review it and show your options.
How do I find out how my group is rated?
Ask your carrier or advisor how the renewal rate was calculated and what role your own claims played. The answer is often in the renewal documents, but may need a direct question.
Can a group change from one rating method to another?
Often it changes with group size or funding choice, and the rules depend on state and carrier. Ask your advisor what applies to you.
Ready? Upload your renewal, or talk it through with someone first. No cost, no obligation.
General information about rating methods, not legal or tax advice. Plan-specific questions belong with your counsel and tax advisor, and we will bring them in.
The Law Behind This Topic.
The laws named on this page link to the statute or regulation they come from. This is general information, not legal advice, and rules change, so check the current text and ask your counsel.
Definitions Under ERISA (29 U.S.C. 1002)
Defines employee welfare benefit plans and related terms under ERISA.
Employer Shared Responsibility (26 U.S.C. 4980H)
The federal rule that can apply to large employers under the Affordable Care Act.
Related Funding Reading.
Funding Options Compared
The page this belongs to.
Employer Benefits Guides
The full section.
Specific and Aggregate Stop-Loss
The protection behind many self-funded plans.
Questioning Your Renewal? Send It to Us.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents, two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →