Covered California Certified Enroller Practice Exam

Which of the following criteria are used to set premium rates?

1. Only Age and Family Size

2. Only Geographic region and Family Size

3. Age, Geographic region, and Family Size

4. Only Geographic region

The correct answer is: Age, Geographic region, and Family Size

Premium rates for health insurance plans, including those offered through Covered California, are primarily determined based on a combination of several key factors, notably age, geographic region, and family size. Each of these criteria plays a significant role in assessing risk and determining the cost of coverage for consumers. Age is an important factor because older individuals typically incur higher healthcare costs than younger individuals, necessitating higher premiums to cover these potential expenses. This aligns with the insurance principle of risk pooling, where the cost must be balanced among those enrolled. Geographic region affects premium rates due to variations in healthcare costs across different locations. For example, areas with higher costs for medical services will generally yield higher premiums because insurance companies adjust rates according to the local cost of care. Family size also impacts premium calculations, as larger families may require more coverage and thus present higher potential healthcare costs. Insurers take into account the number of insured individuals in a household when setting premium rates, meaning that individuals or families with more members can expect to pay more. By combining these three factors—age, geographic region, and family size—insurance companies can effectively assess the risk and set rational premium rates that reflect the expected cost of care for their members. Therefore, understanding the interplay between these criteria is vital