IFPs are priced according to four factors:
Age: age is a key driver of IFP pricing and is regulated by the government to ensure equity and transparency
IFPs go up by a predetermined amount per year depending on the primary member’s age, typically starting from 21 until 64
Generally, the difference in price of a single plan between the oldest and youngest (i.e. the most and least expensive premiums) price cannot be more than 3X. This is part of a government rule to guarantee fair pricing for older individuals and means that premiums go up by a set increment between the ages of 21 and 64 and then stay constant
IFP premium price is determined according to the age of the member at the beginning of the plan year
If the employer plan starts on January 1, the price of the IFP is determined according to the member’s age on January 1
If the employer plan starts on another date, or if the employee experiences a Qualifying Life Event (QLE) such as a marriage or a new child and starts their coverage mid-year, the price of the IFP health plan is determined according to the member’s age when the plan starts
Family/participants: Unlike traditional employer plans, IFPs are priced based on each individual added to the plan:
Spouses: the spouse premium is priced based on age. The total plan price is the sum of the two individuals’ separate premiums according to their respective ages.
Dependent: each dependent included in the IFP adds an additional cost to the premium total. This is unlike a traditional group plan where the number of children typically does not impact the premium cost (i.e. a family plan with one dependent or five dependents costs the same amount).
Dependents’ premiums are usually determined according to age. Dependents between the ages of 21-26 will be priced as adults, and their premium cost added to the primary member’s premium.
The cost of the plan increases with each dependent, usually up to a maximum of four dependents.
If including a spouse, the first 3 dependent children added to a plan increases the total premium cost, and a 4th child (or more) does not increase the cost.
If there is no spouse, the first 4 dependent children added to a plan increase the total premium cost, and a 5th child (or more) does not increase the cost.
The premium cost will be determined by the oldest 3 or 4 dependents, and the younger ones will not count toward the cost.
Geography: IFPs are priced by insurance Rating Area:
Insurance Rating Areas are regions that insurance carriers use to define their pricing strategy. They are generally a group of adjacent zip-codes, but can cut across metro areas and County lines.
The differences in the pricing of an identical plan across insurance Rating Areas can be upwards of 50%. This is because insurance carriers determine premium prices according to the risk factors and demographics of each Rating Area, and they may find some areas to be more risk-prone, and therefore expensive, than others.
Smoking status: smoking status is the only medical screening question asked when selecting an IFP.
An employee’s smoking status will impact the premium price and can add upward of 30% to the costs in some instances
Individual Family Plans (IFPs) cannot be priced according to an individual person’s medical history, gender, or any other personal attributes or characteristics. This is part of the Affordable Care Act (ACA) mandate to allow all individuals to obtain coverage and prevents insurance carriers from discriminating or charging some individuals exorbitant prices.