What are some of the determining factors for a health insurance policy?
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Asked September 3, 2013
Unlike most types of insurance, group health insurance is not underwritten entirely on your personal information. Individual health plans are underwritten based on personal risk, but such plans are also more particular about who qualifies for coverage. Group health plans are open to any members of the group, while individual plans base premiums on the health and other demographics of each individual. It is the individual policy which has the most restrictions as well as the most factors affecting the cost, because group plans use something like statistical averaging to set rate, determined across the entire member spectrum of the plan.
Your age is one determining factor for a health policy. Since younger people tend to be healthier than older ones, younger adults typically pay lower rates. In an individual plan, your age is a direct factor, while group health plans average the age of the member base.
Your occupation is an important factor in individual health plans. Since a construction worker is more likely to be injured on the job, they can expect to pay more than an office worker. Even in a situation where the two groups have the same health plan available, the group with the higher risk will be charged higher premiums.
Your lifestyle is the next important factor. Someone who enjoys mountain climbing is more of a risk to provide health insurance to than someone who crochets as a hobby. Smokers are more likely to have health issues later in life. Married people tend to take fewer risks, so they pay lower rates than singles. In a group health plan, the rates for low risk policyholders may be higher than if they bought an individual plan, while high risk people actually pay less through a group health plan.
The health history of yourself and your family will play a part in determining your rates for health insurance. People with preexisting conditions or a lengthy family history of heart disease are more likely to be denied individual coverage or face premiums that are much higher than the average. Group health plans are not allowed to deny coverage based on family health history, but the trade is that group plans tend to have a higher base premium to accommodate the higher rate of preexisting conditions.
Whether you are buying an individual or group health plan, your rates will be affected by the number of people you are buying coverage for. This increase is based entirely on the need to provide coverage to a greater number of people, with the rates going up for each new addition. Where preexisting conditions are concerned the rates can increase dramatically with each new addition who suffers from such a condition.
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Answered September 3, 2013 by Anonymous