Community Rating

Community rating is a way of setting premiums where everyone in a market pays the same rate for the same plan, adjusted only for a few allowed factors, instead of being priced on their own health. ACA individual and small-group plans use "modified" community rating: age (within a 3-to-1 limit), tobacco use, geography, and family size can change the price. Health status cannot.

The practical effect is a subsidy from the healthy to the sick, and from the young to the old, within each market. A 60-year-old can be charged at most three times what a 21-year-old pays for the same plan, though actual claims for that 60-year-old run closer to five times higher. Small employers with fewer than 50 employees are community rated in most states, which is why a small company with a healthy young staff often pays more than its claims would justify, and why some of those companies look at level-funded plans, which are priced on the group's own experience. Large groups are experience rated instead.

The takeaway: if your small group is healthy and paying community rates, it is subsidizing the rest of the pool. That's not a reason to leave the market, but it is a reason to get quotes on the alternatives every year.