How are premiums determined for groups under the experience rating method?

The experience rating method for determining premiums for groups is based on the overall claims experience of that specific group. This method takes into account the actual claims history of the group over a defined period, allowing insurance companies to assess how much risk the group presents. If the group has a history of high claims, the premium will be higher to reflect this increased risk. Conversely, if the group has lower claims, they may benefit from lower premiums.

This approach contrasts with other pricing methods, such as individual rating based on each person's claims history, or flat rates set by regulations which don't take into account the specific group's risk profile. Experience rating is thus more tailored and precise, aligning premiums more closely with the actual health costs incurred by the group. Moreover, it encourages good risk management within the group, as lower claims can lead to lower future premiums.