Who is in risk pool for attained-age priced supplements?

[dabsmith]

I'm not sure this sort of thing is something agents would know, but I can't think of a better place to ask and so far haven't figured out how to find an answer elsewhere.

In a Plan G supplement with attained-age premiums, is everybody who buys that plan in the same risk pool? And they differ only in the amount of premium they pay (which is based on their age)? Someone has claimed that for attained-age supplements, each age has its own risk pool, and that doesn't sound right.

Any idea of where this might be discussed/explained in an "official" manner, or is this just something people in the business know?

 

[somarco]

Risk pool rate adjustments are blended.

Everyone who has an attained age G plan will see their renewal rates adjusted based on the loss ratio for that state blended with the LR for the country. These may be further tempered by reinsurance premiums.

The same would apply to issue age and community rated plans. The only thing that does not impact renewal rates is the health of the individual policyholder.

Agents and consumers overthink rate adjustments. Why does it matter?

 

[dabsmith]

Am I understand the replies correctly? It sounds like one is saying that in a given plan (e.g. Plan G) with premiums based on attained age, there are dozens of separate risk pools--one that comprises only 65-year-olds, one that comprises only 66-year-olds, one that comprises only 67-year-olds, and on up to whatever age the oldest person in the pool is. And the other reply is saying everybody in that Plan G is combined into one risk pool.

The latter sounds more correct to me, if only because when an insurance company announces a rate increase, it's simple, like Texas Plan G: 15%. If there are dozens of risk pools, the percentage increase would presumably differ for each risk pool.

But that brings up the other differentiators: sex and smoking. Do men and women have their own separate risk pools? Do smokers and nonsmokers? Or is everybody with a given plan thrown in together and some sort of calculation of their individual premiums is made, based on the claims made by everybody with that plan?

 

[somarco]

It sounds like one is saying that in a given plan (e.g. Plan G) with premiums based on attained age, there are dozens of separate risk pools--one that comprises only 65-year-olds, one that comprises only 66-year-olds,

Nope, doesn't work that way.

An amplification to my earlier post . . . G plan renewals are typically a higher percentage than N or HDG. But there is no differentiation for plans with unisex pricing vs gender based pricing, tobacco use vs non-tobacco, GI & IE plans vs underwritten, HH or spousal discount and so forth.

 

[dabsmith]

Thanks for the amplification. What you're saying is how I thought it would work, but that first reply (which has disappeared, but said there are separate risk pools for each age) got me confused so I wanted to nail it down.

 

[somarco]

separate risk pools for each age

That would be a nightmare.

Initial rates account for age, gender, tobacco use, HH discounts, zip, county, etc.. This is true regardless of the rating structure (entry age, attained age, community rating). Renewal rates reflect loss ratio's, inflation, utilization but are not segregated by the same buckets used for initial rates.

Repeating . . . sometimes agents "project" rate increases based on historical renewals. That is nothing but voodoo magic. Too many factors are in play for initial and renewal rates that make it reckless for an agent to say "buy this plan from that carrier because your renewal rates will be lower"

That is an E&O claim waiting to happen . . .