Adjusted Community Rating


Also found in: Acronyms.

Adjusted Community Rating

The stratifying of insurance premiumrates—e.g., of health insurance—based on all members’ use of health benefits in a particular community and not on individual use of benefits.
In simplest terms, adjusted community rating is a rating method under which an insurer charges a particular group an amount derived by modifying the community rate for the group's specific demographic factors (e. g., age, gender, family composition, geography). Under ACR, a single rate applies to all small groups in the market, with limited adjustments allowed for specified “case characteristics.” The insurer sets a base rate for a particular set of case characteristics. The group's actual premium rate is then determined by varying the base rate based on a group's specific case characteristics that state law permits insurers to take into account when setting premiums. Allowable case characteristics often include age, gender, industry, geographic area, family composition, and group size.
References in periodicals archive ?
However, an important distinction between the fully insured and self-insured markets is that self-insured health plans are exempt from state insurance regulations under the Employee Retirement Income Security Act (ERISA) and are also not subject to many of the regulations imposed by the ACA including the adjusted community rating regulations.
There has, therefore, been considerable speculation that the ACA's adjusted community rating regulations may result in an increase in selective self-insurance among employers in the small group market with relatively healthier workers and, in turn, concern about the possible implications for adverse selection into the fully insured small group market with resulting higher premiums (Lucia, Monahan, and Corlette, 2013; Weaver and Mathews, 2013).
Because the implementation of the ACA's adjusted community rating reforms has been delayed in the employment-based market, we instead exploit cross-state variation in small group market rating regulations and allowable rating factors that existed prior to the ACA.
We conclude by considering these findings in the context of the forthcoming implementation of the ACA's adjusted community rating regulations in the small group market and by briefly discussing options for state and federal policymakers to consider to alleviate the adverse selection into the small group market resulting from selective self-insurance.