RHA Premiums and Underwriting
Guaranteed Issue Coverage
All pre and post-65 RHA coverage options are fully insured, guaranteed issue regardless
of employer subsidy or participation levels, or the individual health status of
eligible retirees.
Premiums
Initial RHA premiums are established on an employer specific basis. Factors such
as past claims experience, which benefit designs an employer elects to offer, employer
subsidy levels, and which states their retirees are located in also are taken into
consideration when establishing employer premiums. Generally, employers that subsidize
coverage have lower premiums because the employer subsidies help attract healthier
retirees into the RHA risk pool.
Without employer subsidies, healthier retirees tend to consider medically underwritten
individual policies outside of RHA. These individual policies can be less expensive
because favorable rates are offered to healthier people. In the long run, individuals
that secure individual policies are exposed to significant premium increases if
they subsequently have health issues. This is because insurers have relatively broad
discretion to increase premiums based on the individual’s claims and health status.
RHA premiums are designed to be more stable over the long term by basing annual
increases on the experience of the broader RHA pool.
Annual premium changes for RHA are based on:
- The overall claims experience of the RHA risk pool; and
- Employer specific factors such as claims experience and overall enrollment rates.
Employers with a higher percentage of eligible retirees enrolled in the employer’s
retiree coverage options have their annual renewals more closely linked to the overall
RHA risk pool’s experience. Employers with lower enrollment rates still have their
annual renewals tied to the experience of the overall RHA pool, but may have rate
changes that vary more significantly from the RHA pooled experience compared to
employers with higher overall enrollment levels.