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California health insurance  -  Individual California health insurance  -  Rate Tiers

What are Rate Tiers in California Individual and Family health insurance?

ACA UPDATE:  The individual rating tiers no longer apply to the California market as of Jan 1st 2014.

Information below pertains to old market rules which no longer apply are available for old grandfathered plans only.

To quote the new plans standardized ACA rates and tax credits, click on Individual health quote including Covered Ca

After you submit your individual health application in California, the carrier will come back with a decision. The time table can vary depending on whether they request medical records and/or missing information on the application. The rate that the carrier offers (if approved) is based on the health information on the application and/or within received medical records. By California law, the carrier can change these rates with what is called "Tiers".

What are the rate tiers?

The rate you see when you run your individual health insurance quote in California is Tier 1. These are the best rates available. You cannot get better rates purchasing through another California health broker or directly with the carrier as discounting is not allowed. If you are in good health, Tier 1 is most likely what you will be offered. This rate can (and does) change during Statewide rate changes which have occurred annually over the past decade. You are still on a Tier 1 rate with the increase. Tier increase only apply to the medical and have no affect on dental coverage. Tou may want to downgrade coverage to minimize the affect of the increase. Family members can also split off onto separate policies if they have a higher tier.

If the carrier approves your coverage but wishes to charge more to offset pre-existing conditions, you will receive notification of a Tier increase.
Tier 2 is typically 25% higher than the standard rate but this can differ among the carriers. Tier 2 is typically applied for lower-cost medications (assuming condition is successfully treated), weight being higher than standard range but not obese or morbidly obese, and or recent/ongoing minor health issues and treatment. Each carrier's underwriting requirements are different so one carrier may apply the Tier 2 rate while another will not. It might make sense to apply to two carriers if you feel the a increase is likely. This way, you can see which California health carrier will come back with the best offer. They can differ.

Tier 3 is typically 50% higher than the standard rate. This may occur with multiple medications (or one more expensive one) and/or pre-existing conditions slightly more serious. Height and Weight in the obese levels will usually trigger a Tier 2 as well.

Tier 4 is typically 100% higher and Tier 5 (if available) considerably more. These are more rare as the carriers will usually decline coverage. There is not much room between Tier 3 and declination.

Smoking Tier.  A new change in California health insurance is that the carriers can Tier-up a policy if the applicant is a smoker or has used tobacco products in the last 12 months. This, by itself, can result in a 20% increase.

What can be done to reduce Tier increase for individual health policies

Keep in mind that the carriers tend to be more conservative with a new applicant and hence the tier increase. We may be able to have the increase removed in the future if the underlying health issue is no longer a problem for a period of time or if we have more time away from a prior issue. We typically recommend going back in 3-4 months after the initial application and requesting a Tier Review assuming good health. There may also be some item in their list of issues that we can clarify to remove the higher tier. A change of coverage application is usually the means to request a Tier Review.

With weight, we usually need to document in a doctor's office a measurable loss of weight for a period of six months. Each carrier is different but this is a good rule of thumb.

For medications, switching to generic drugs (under recommendation from your doctor) can potentially affect the tier increase after a period of effective generic usage.

Accurately completing the individual health application

It is important to correctly list all your pertinent health information on the individual health application that the carrier's underwriter will need to make a decision. Information that is not listed on the application can cause your coverage to be rescinded at a later date. It's best to list everything up front and try to reduce the tier increase in the future if applied to your policy. Once we remove the tier, they cannot go the other way (increase Tier) due to your specific health claims. It may some time and a bit of good health over a period of time, but with persistence, we have some success in reducing the Tier increases.

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