Health Insurance Underwriting and Rating
Core concepts
Underwriting is the process of evaluating risk and deciding whether and on what terms to insure an applicant. Know medical underwriting (health history, medications, prior claims), risk classification, and field underwriting (agent's role in gathering accurate information). Understand rating factors: age, gender (where permitted), geography, tobacco use, family composition, and group characteristics. Know experience rating versus community rating and manual rating.
Understand adverse selection control through waiting periods, exclusions, and eligibility rules. Know guaranteed issue and guaranteed renewability, and how the ACA limits medical underwriting in the individual market. Understand claims experience, loss ratio, and reserves. Recognize the difference between individual and group underwriting, including group size and participation requirements.
Traps
Questions confuse experience rating (based on the group's own claims) with community rating (based on a broad pool). Another trap: assuming agents can bind coverage or approve applicants-field underwriting gathers information but final decisions rest with the insurer. Watch for questions where an omission on the application affects claim payment or contestability.
Worked example
A small employer with 12 employees applies for group coverage. The insurer reviews the group's prior claims history and demographics, then sets a rate reflecting the group's experience and participation level. If participation falls below the required threshold, the insurer may decline or adjust terms.
Rule of thumb: Underwriting decides if and how to insure; rating decides what to charge.