What is the difference between community rating and experience-based rating in health insurance premiums?

• A. Experience rating charges the same premium for everyone.
• B. Community rating varies by health status.
• C. Community rating charges the same premium to all enrollees regardless of health status; experience rating adjusts premiums based on the individual's or group's health risk and claims history; ACA primarily uses community rating with some age differences.
• D. Experience rating is illegal under ACA.

Answer: (C)

Pricing of premiums in health insurance hinges on how risk is pooled. Community rating sets a single premium for all enrollees, so healthy and less healthy individuals pay the same price, spreading costs across the entire pool. Experience rating, by contrast, adjusts premiums based on the individual’s or group’s health risk and past claims history, meaning those with higher risk or higher expected costs pay more.

Under the ACA, the system largely uses community rating, with some permitted variation by age rather than by health status. So healthier people don’t pay significantly less because of good health, and sicker individuals aren’t priced out, within age-related bands.

That’s why the best description is: community rating charges the same premium to all enrollees regardless of health status; experience rating adjusts premiums based on health risk and claims history; the ACA largely uses community rating with some age differences.

The other statements don’t fit: experience rating does not charge everyone the same; community rating does not vary by health status; and experience rating is not illegal under the ACA.