Covered California Certified Enroller Practice Exam

What are three criteria for premium rate that insurers can make?

1. Age, Health Status, Geographic Pricing Regions

2. Age, Family Composition, Drug Usage

3. Age, Geographic Pricing Regions, Family Composition

4. Health Status, Geographic Pricing Regions, Family History

The correct answer is: Age, Geographic Pricing Regions, Family Composition

The correct choice identifies three key criteria that insurers can use to determine premium rates: age, geographic pricing regions, and family composition. Age is a significant factor because insurance companies consider the risk associated with different age groups when setting premiums. Older individuals typically face higher health risks, and as a result, they may be charged higher premiums compared to younger individuals. Geographic pricing regions play a crucial role as well, since healthcare costs can vary dramatically from one location to another. Insurers analyze the costs of healthcare services in specific locales, which can influence the pricing structure according to regional risk factors. Family composition also affects premium rates. The size and makeup of a family can lead to variations in expected healthcare needs and costs. For instance, families with children may have higher health care utilization than single individuals. Options that do not include these three criteria either introduce less relevant factors or important criteria not found in the correct answer. For instance, while health status is undeniably important in underwriting decisions, it is not specifically allowed under the premium rating criteria due to regulations aimed at preventing discrimination against those with pre-existing conditions.