What is the main purpose of rate-making in health insurance?

The primary purpose of rate-making in health insurance is to establish premium rates based on expected costs. This process involves analyzing various factors such as healthcare utilization, the risk profile of the insured population, historical claims data, and overall market conditions. By accurately predicting future costs associated with healthcare services and treatments, insurance companies can set premiums that are both competitive and sufficient to cover these anticipated expenses, ensuring the financial viability of the insurer while providing the necessary coverage for policyholders.

In the context of health insurance, effective rate-making is crucial because it directly influences the affordability of coverage for consumers and the sustainability of the insurer's operations. This approach requires a deep understanding of the healthcare system, risk assessment, and financial forecasting to strike an appropriate balance between risk and reward.

While limiting the number of claims, improving customer satisfaction, and enhancing insurance marketing are important aspects of a health insurance business, they do not directly capture the core function of rate-making, which specifically focuses on financial decisions regarding premium rates based on expected healthcare costs.