Health Coverage Rates and Rate Reviews

Health insurance relies on the spreading of risk among diverse individuals or groups in order to operate. All insurance companies use data and statistics to predict levels of risk for various individuals or groups. This risk calculation information is used to develop rates.  A health insurance rate covers claims for medical services, insurer administrative costs and (sometimes) profit.

Health Insurance Premiums:
A rate is the base price for health insurance.  A premium, or the amount paid monthly, quarterly or yearly for the insurance, is then calculated on this rate based on a number of factors.

Factors that Determine Your Premium:
Individual Plans (for those who purchase their coverage directly from a carrier or the Health Insurance Marketplace, not job-based coverage):

  • Age (the premium rate cannot vary more than 3 to 1 for adults for all plans)
  • Benefits and cost-sharing you choose
  • Number of family members on the plan
  • Where you live in Michigan
  • Tobacco use (the premium rate cannot vary by more than 1.5 to 1)

Small Group Plans (for those who have coverage through an employer with less than 50 employees):

  • Benefits the employer selects
  • How much the employer contributes to the cost
  • Family size
  • Age (the premium rate cannot vary more than 3 to 1 for adults for all plans)
  • Tobacco use (the premium rate cannot vary by more than 1.5 to 1)
  • Where the employer is in Michigan

Large Group Plans (for those who have coverage through an employer with more than 50 employees):

  • Benefits the employer selects
  • Employee census information including age, gender, family status, health status and geographic location
  • How much the employer contributes to the cost
  • Industry
  • Group size
  • Wellness programs

Review of Health Insurance Rates:
The Department of Insurance and Financial Services (DIFS) does not set health insurance rates. However, DIFS ensures that all health plans comply with Michigan law and reviews the rates filed by health carriers selling individual plans, Medicare supplemental policies, small employer group plans, and plans sold by health maintenance organizations. 

DIFS does not review the rates for: commercial large group plans (coverage through an employer with more than 50 employees); self-insured employers (health benefits whereby the employer provides the benefits to employees with its own funds); and government entities.

Additionally, as a result of the Patient Protection and Affordable Care Act, health carriers must inform the public when they want to increase premium rates for individual and small group policies by an average of 10% or more.  To view a listing of carriers who have requested such an increase for a product they sell, see https://ratereview.healthcare.gov/

Rate Review Process:
Health carriers submit their rate filings to DIFS for review. In the filings, health carriers give DIFS information regarding recent and projected medical care costs, including any benefit changes; past and future loss ratios (or how much of every premium dollar goes to pay health care claims); overall financial strength and current and future administrative costs.  DIFS has 30 days with the option to request an additional 30 to determine whether the proposed rates meet applicable Michigan law and can be approved for health carriers which DIFS has rate approval authority.