How are Group Health Insurance Premiums Calculated?

Here are the things that are considered by the insurance companies while calculating the group health insurance premiums: -

1. Age: The age of the proposer or the applicant plays an important role in deciding the group health insurance premium. Higher the age of the insured, higher would be the premium to be paid. Including parents can increase the group health insurance premium drastically. The group health insurance premium would be calculated on the age which would be taken in a certain bracket such as 18-25 years in one bracket etc. The mortality ratio and the chance of developing diseases or illnesses and falling sick increases with increase in age and therefore the premium would be high for aged employees. 

2. Sum insured: The sum insured or the coverage required under the group health insurance policy also decides the premium to be Payable. Higher sum insured leads to higher premium payable. There would be a difference of premium payable if the floater option is opted when compared to the non floater option. Floater option comes with less premium as the sum insured would be floating among the members insured whereas non floater sum insured means each member would have their separate sum insured. Instead of higher sum insured the employer could go for buffer sum insured which can be given to any employee who has exhausted their sum insured during the policy period.

3. Add-ons: Add-ons are the extra coverage which can be taken under the group health insurance policy on payment of additional premium. The more the number of add-ons, the higher would be the group health insurance premium. The premium of add-ons would be calculated as a percentage of the basic premium or the base rate charged under the group health insurance policy.

4. Claim history: The claim history in the previous year would also affect the group health insurance premium. If there are more claims with a high claim ratio then the insurance companies would charge a high premium anticipating higher claims. This would be decided if the claim dump or the entire claim details are shared with the insurance company.

5. Profession of the insured: The profession of the insured would also affect the group health insurance premium. The premium would be directly proportional to the risk in the profession of the insured. Higher the risk, higher would be the group health insurance premium. The group health insurance premium for Chemical factory workers or Employees in nuclear power plants would be high when compared with the employees working in software or those who have desk jobs.

6. Intermediary: Group health insurance premium depends on the intermediary you are dealing with. It is known that insurance brokers would give the least group health insurance premium when compared with other insurance intermediaries as they have the high bargaining power. High bargaining power means reduced premium to be paid by the Customers for the group health insurance policy. In addition to this insurance intermediaries can get quotes from different insurance companies and bargain with the insurance companies to reduce the group health insurance premium directly benefiting the customers.