What does "community rating" refer to in health insurance?

Community rating in health insurance refers to the practice of pricing premiums based on the collective risk of an entire community rather than the individual risk of each policyholder. This approach aims to ensure that all members of a community, regardless of their individual health status or risks, pay a similar amount for health insurance coverage. By pooling the risks among a larger group, community rating promotes equity in access to healthcare by preventing discrimination based on health conditions or claims history.

This method contrasts with individual rating, which sets premiums according to the specific health status, age, or lifestyle factors of an individual, potentially leading to higher costs for those deemed higher risk. By utilizing community rating, insurers can create a more supportive environment for those with pre-existing conditions or other health challenges, helping to maintain coverage for all individuals within the community.

Community rating can improve affordability and accessibility for lower-income individuals and families, as it reduces the burden of disproportionately high costs associated with perceived higher-risk individuals.