There are dozens of factors that can affect how much an insurance premium may cost. When an employer is putting together a group health plan, they must factor in many components to get the right plan with the right coverage for their employees. But that can be difficult to do, so they may work with their health insurance carriers to utilize banded rates to get the best possible plan.
How do Age Banded Rates Work?
A banded rate is a rate that falls under a certain range of data. So, a wage banded rate would categorize premium costs based on wage range, i.e., $45,000 – $59,999 would be charged a different premium than $60,000 – $74,999. Age banded rates mean that the 20-somethings on your insurance plan would pay a lower premium than those 50 years of age and older.
There is no true format for age banded rates, but the Affordable Care Act has implemented rules that keep companies from charging unreasonable amounts like three times or more for older employees than their younger employees. So, one may see very small incremental changes in premium rates depending on ages.
Age can be a factor in health insurance premiums because younger people are likely healthier, with less complicating factors affecting their health. They also take fewer medications on average and have lower blood pressure and other important health risk factors.
If a business decides to offer age banded rates, it is relatively simple to set up within their benefits enrollment platform. Just like there would be groups for a self plan vs. family plan, there would be one for age plans. The employee birth dates would automatically be entered into your benefits platform, so once the rates and ages are set up in the system, it would be a matter of selecting that plan per age group and applying it as an option.
An example age banded rate could be:
- 20 – 29 are charged a $100 monthly premium
- 30 – 39 a $120 monthly premium
- 40 – 49 a $135 monthly premium
- 50 – 59 a $150 monthly premium
- 60+ a $175 monthly premium
What Other Factors Can Affect Insurance Premiums?
Spouse and Dependents
The more people covered by an insurance plan, the more expensive it will be. When you have a spouse or family you need coverage for, and both you and your spouse are offered employer insurance, take a close look at all of your options.
More often than not, it will be more cost-effective to pay a single premium and share a plan. However, for some spouses, like those in healthcare who receive great coverage, it may make more sense and save more money to be on separate plans. So weigh your options and try some mock-enrollments before you apply.
Where you live can impact how much you are charged for premiums. In large metropolitan areas, there may be far more competition amongst insurance providers, thus the potential for higher premiums depending on what coverage is available to you. More rural areas may have less competition and fewer options, thus the ability to be charged a more reasonable premium.
History of Tobacco Use
Despite major rollbacks on pre-existing conditions, smoking can still affect premium rates. Sometimes at a rate of 1.5x higher premiums than those of non-smokers. This is often seen as controversial, but studies have shown a positive correlation between smokers and not purchasing insurance. That is factored into premiums, and those who get insurance who currently smoke or have smoked in the last 12 months risk a higher premium than non-smokers. This isn’t always the case but should be considered.
Factors That Do Not Affect Premiums.
Your gender cannot and will not mean paying higher premiums than your colleagues. Women used to be charged up to 80% more in premiums than men, but that has since changed. In fact, many women-only services like pap smears, mammograms, and prenatal care are considered preventative care and should be 100% covered. It will also not affect premiums.
Current Health or Medical History
No longer is the current status of one’s health or past medical history and conditions going to affect premium rates. Pre-existing conditions can sometimes affect coverage or how much is billed, but your premium will not be affected by those. This is incredibly nice for people with long-term conditions like asthma or diabetes that will always need ongoing insurance coverage.
Those employers looking to integrate age rate bands, composite rates, or other premium adjustments into their benefits enrollment system should contact BeneQuick at (651) 894-6400. We are innovating how benefits enrollment can be handled and hope to get you started on getting your employees enrolled for the best possible insurance.