Which statement best describes experience rating in large-group premium determinations?

• A. Premiums vary based on the group's own claim experience
• B. Premiums are fixed regardless of group experience
• C. Premiums are based on industry-wide rates
• D. Premiums are determined by the insurer's discretion

Answer: (A)

Experience rating in large-group premium determinations means the price of the group plan adjusts according to the group's own claims history. Insurers look at the group’s past claims over a rating period and set premiums that reflect that risk—more claims lead to higher premiums, fewer claims lead to lower premiums. This ties cost to how risky or healthy the group actually is and encourages favorable risk management. It’s not a fixed premium that ignores experience, it isn’t based on broad industry-wide rates, and it isn’t simply at the insurer’s discretionary whim.