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If it feels like health insurance costs climb every year, you’re not alone. The concern over price increases has reached as far as the US Senate. It’s not a problem that only affects a subset of the population. It’s a problem we all feel.

Before we understand how to improve it, we must understand how health insurance pricing works.

Fortunately, insurance pricing is a simple formula:

formula for calculating health insurance costs

This formula is how most insurance pricing works. The hard part is predicting total claims before they happen and setting prices based on those predictions. 

Pricing and predictions get easier as the “number of people in the insurance plan” increases. As the pool of people grows, it becomes simpler to predict risk. In an ideal situation, these pools of people also help reduce insurance costs as larger, lower-frequency claims are spread across a larger population.

Now let’s talk more about how those group sizes affect health insurance pricing.


In the world of health insurance, there are three ways carriers group populations and price insurances:


  • Community Rating — Businesses with fewer than 50 employees and, in states like New York, employers with fewer than 100 employees, are community rated. Community-rated employers are placed into a rating community that is geographically based. These pools tend to be large with risk spread out among all group participants. 
  • Experience Rating — Health insurance carriers use these plans for larger businesses. The total cost of claims is spread out among all plan participants. So an employee group could be as small as 51 people. Imagine what a high-cost injury or sickness does to the price of insurance in that 51-person group. These plans tend to be priced very well for employers with people who don’t utilize their insurance often but can be extremely overpriced for groups who do use their insurance often. 
  • Individual Marketplace Plans — These plans represent the open marketplace for insurance. Anyone can go to the marketplace and purchase insurance. The pricing on these marketplaces is based on the total claims of the people who utilize them. Marketplace plans have the potential to serve extremely large pools of people. As such, they diversify risk well and give everyone, regardless of employment status, equal opportunity to purchase fairly priced health insurance.

As more and more people head to the individual marketplace, there is a more equitable distribution of claims expenses and a broader group to absorb those expenses. 

The effects of more people joining individual marketplace plans is already being seen. Rates are becoming more competitive than community-rated plans or at least beginning to approach parity. In many states, we see less rate volatility in marketplace plans as well. 

So if you’re offering your employees a community-rated plan or an experience-rated plan, are you stuck there? 

Absolutely not!

The new group health insurance option—YourWay Frontier—moves people out of traditional group models and into individual marketplace plans. Frontier also makes benefits administration less burdensome and empowers employees with broader choices in the health insurance market.

YourWay Frontier modernizes and optimizes group health insurance down to two easy steps:


Put money into your employees’ health benefit accounts.


Your employees use that money to buy their health insurance in the open market.

Simple, right?

More people fill up the individual marketplaces, creating better risk modeling for carriers, and improving health insurance price stability for consumers.

The big question you’re probably asking is, “Can I save money by offering this new plan?” The answer is, maybe. You can compare your current costs to the cost of plans on the individual marketplace here. If you’re overpaying for group health insurance, let’s chat about getting your employees better benefits for less money.

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