Study On The Pricing Approaches Of Group Health Insurance

This paper mainly discusses the pricing methods of group health insurance.In the first part of this paper, the present status of commercial health insurance home and abroad was introduced . We can know that the development of commercial health insurance is a good way adapting to Chinese economy level by contrast and reference .As an important part of Chinese medical security system , commercial health insurance has a deep relation to the life of every person. By contrast to personal health insurance, there are many advantages in group health insurance, which include: simple procedures, low insurance rates, and broad security items and so on. It is an important aspect to develop group health insurance. In China ,to sell and buy group health insurance is necessary and feasible.However ,group health insurance has been developed just for more than 10 years in China. The research of group health insurance is very little, which is fatal to the healthy development of group health insurance. The health insurance actuarial science is also a difficult problem .So , it is necessary to do some research on it .In the second part of this paper, the basic problems of the pricing methods of group health insurance are discussed ,such as the underwriting , yearly medical expense increase factor and the subsidy and so on.One group is organized by more than one member .The risk of one group is lower than the summation of private risk of every member. The scale and the structure of one group also effect the pricing methods of group health insurance.The phenomenon of subsidy only exists in the group insurance. It implies that every member in the same group will pay the same money and get the same cover despite of their gender and age. This is sharply different from personal health insurance ,in which the insurance rate is based on gender and age. This means the low-risk members have to supply subsidy to the high-risk members in the same group.Another special phenomenon is the rapid increase of medical expense year by year . This can be measured by a factor. If we ignore this factor in the pricing procedures , we can't get enough premium to pay the compensation in the future .In the third part of this paper , the pricing methods of group health insurance are discussed .These methods are correspond to basic methods and principles of insurance products. By a general equation , we can educe three pricing methods used in group health insurance.The first method is called Experience Rate Method. It is mainly used in the big group .It is divided into two methods , prospective experience rate method and retrospective experience rate method. Because it is simple in theory ,there are little sole discuss on this method in this paper.The second method is called Tabular Rate Method.It is mainly used in small group .According to the age ,gender ,income ,zone and field and so on ,the rates are computed and arranged in a schedule.The third method is called Mixed Pricing Method. It uses both experience rate and tabular rate by weight to get a new rate .It is a good method used in the most group health insurance pricing procedure.In the fourth part of this paper, the pricing method of small group health insurance is discussed .As we mentioned , tabular rate method is most used .At first ,we discuss what factors affect the schedule rating in detail. In practice , we can set different values to different factors. So, we can get the right premium to the right man and group.Because of the possible fluctuation of the small group health insurance premium , it may make out some misunderstanding between the insured group and the insurer.Some group may refuse to buy the group health insurance products in the next year.To make more and more people under the security of group health insurance, NAIC in America exerts some restrictions on the price of small group health insurance products. One of main measures is that the ratio of highest rate and lowest rate should fluctuate between 2 and 3 .In the fifth part of this paper , the pricing method of medium-group and large group are discussed . This part can be acted as the most important one in this paper. We discuss the mixing pricing method and the determination of credibility factor .Credibility is a form of insurance pricing that is widely used, particularly in North America. The theory of credibility has been called a"cornerstone"in the field of actuarial science. Credibility can be divided into limited fluctuation credibility and greatest accuracy credibility ,and the latter is most used in practice and in theory.Buhlmann-Straub credibility equation is a commonly used one in the non-life actuarial science. However ,it is not fit to the pricing of group health insurance. Fuhrer described a new credibility equation which is similar to B-S credibility equation ,but it is more feasible in the pricing of group health insurance. In this paper , the origin of this equation is discussed in detail.MSE credibility method is another important method described in this paper . We use mathematic theory to prove this MSE credibility rate is more closed to the real rate than the experience rate or the tabular rate.The advantage of this paper is the description of two credibility methods, which can't be seen in the previous papers. In this paper , we discuss these two methods in detail.