Group Insurance Premiums – Rating Factors
Health Care Reform AB 1083

Health Care Reform has
very few legal Rating – Premium Factors


Under Health Care Reform in California  you can only be charged a different premium for the following factors:


New Advantages

Rating – Premium Computation – #Criteria – Factors 
under Health Care Reform

Small Biz Rating Criteria 2018 Update for Child Rates

2018 Update for Child Rates

Top 5 - 10 causes of Long Term Disability Claims 

Lower back disorders  ♦   Depression  ♦ Coronary heart disease, arthritis and pulmonary diseases  (Met Life♦  Disability Can Happen    CDC Statistics

Top 5 causes of Disabilty

Click here to visit our website on Disability Payments - Insurance 

Rating Zip Codes, Counties – #Geographic Region 

Graphic Map of NEW Rating Regions

Rating Regions Chart Southern CA

10753.14 (2) (A) Geographic region. [Zip Code]The geographic regions for purposes of rating shall be the following:

(xv) Region 15 shall consist of the ZIP Codes in Los Angeles County starting with 906 to 912, inclusive, 915, 917, 918, and 935.

(xvi) Region 16 shall consist of the ZIP Codes in Los Angeles County other than those identified in clause (xv).

(xvii) Region 17 shall consist of the Counties of San Bernardino and Riverside.

(xviii) Region 18 shall consist of the County of Orange.

(xix) Region 19 shall consist of the County of San Diego.

   (i) Region 1 shall consist of the Counties of Alpine, Del Norte, Siskiyou, Modoc, Lassen, Shasta, Trinity, Humboldt, Tehama, Plumas, Nevada, Sierra, Mendocino, Lake, Butte, Glenn, Sutter, Yuba, Colusa, Amador, Calaveras, and Tuolumne.

(ii) Region 2 shall consist of the Counties of Napa, Sonoma, Solano, and Marin.

(iii) Region 3 shall consist of the Counties of Sacramento, Placer, El Dorado, and Yolo.

(iv) Region 4 shall consist of the County of San Francisco.

(v) Region 5 shall consist of the County of Contra Costa.

(vi) Region 6 shall consist of the County of Alameda.

(vii) Region 7 shall consist of the County of Santa Clara.

(viii) Region 8 shall consist of the County of San Mateo.

(ix) Region 9 shall consist of the Counties of Santa Cruz, Monterey, and San Benito.

(x) Region 10 shall consist of the Counties of San Joaquin, Stanislaus, Merced, Mariposa, and Tulare.

(xi) Region 11 shall consist of the Counties of Madera, Fresno, and Kings.

(xii) Region 12 shall consist of the Counties of San Luis Obispo, Santa Barbara, and Ventura.

(xiii) Region 13 shall consist of the Counties of Mono, Inyo, and Imperial.

(xiv) Region 14 shall consist of the County of Kern.

[Calif. Insurance Commissioner 2.20.2013 Proposal to divide into 18 Regions Los Angeles Times]

[Employer zip code, determines rates, however, residential zip by each employee is still needed on census to establish network availability, per Heide S email dated 9.9.2015]

   (B) No later than June 1, 2017, the department, in collaboration with the Exchange and the Department of Managed Health Care, shall review the geographic rating regions specified in this paragraph and the impacts of those regions on the health care coverage market in California, and make a report to the appropriate policy committees of the Legislature.

What justification is there for Insurance Companies to charge different rates in different Counties or to even have 19 different rating area’s in CA?


The ACA Health Reform allows insurers to use geographic rating factors to adjust premiums to reflect variations in medical costs across rating areas attributable to such factors as differences in labor and other operating costs, the relative strength of their network/provider agreements in a given area, and/or cost shifts associated with high Medicare or Medicaid enrollment and lower payments from these sources. The benefit of geographic rating is that it provides insurers with marketing flexibility and can help ensure that insurance purchasers in low cost areas benefit from the efficiencies of their local health care system. It may also encourage more insurers to offer plans in high cost areas that they would otherwise avoid if these costs could only be recouped across their entire coverage area. On the other hand, geographic rating may also undermine the incentives for health plans to encourage efficiency among health care providers in high-cost areas.

The cost of delivering care varies dramatically from one area to another, and insurers often vary their rates by county or by ZIP code using the employer’s business address in the small group market, or the applicant’s home address in the individual market.  Safe harbors for geography have been set for each state, depending on the variation in medical costs within the state, and range from no variation in the District of Columbia to 1.9:1 in Florida

Insurers must submit data that demonstrates a correlation between case characteristics (e.g., geographic area) and
increased medical claims costs * *

risk screening –  insurers could avoid entering counties that have a higher share of unhealthy consumers.

market segmentation – segment a market and avoid competition

entry cost hypothesis – meeting network adequacy standards and establishing a competitive network could be significant for insurers. This will be especially true if an insurer does not have legacy provider networks.

risk selection *

Geographic rating areas are units made up of metropolitan statistical areas (MSAs), counties or three-digit zip codes, which are used by insurance carriers to price premiums. An MSA is a geographical region with a relatively high population center and close economic ties throughout the area.

“Variations in health insurance premiums across regions arise due to variations in the cost of health care across regions,” said Insurance Commissioner Marguerite Salazar in a news release. “These variations are not new, but the transparency brought by the Affordable Care Act is new.” *


Bibliography, Links & Resources

Why Do Insurers Selectively Enter Counties within a Rating Area on the ACA Marketplaces?
Hanming Fang† Ami Ko‡ April 2020

Our Webpage on Medical Loss Ratio

Rate Regulation

Location, Location, Location:
Geographic Spending Issues and Medicare Policy


ACA Rate  Rule for  Dependent Children

The Final Rule directs all health plan issuers of non-grandfathered small group and individual plan coverage (on and off the Exchanges) to revise the member level rating age bands used for individuals 0-20 years of age from using one age band to now create 7 age bands.
The first age band cover ages 0-14, then single year age bands cover 15, 16, 17, 18, 19 and 20.
This change will align with utilization of services while smoothing rate increases over time.  Kaiser

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