What distinguishes "community rating" from "experience rating" in insurance?

Community rating is a method of determining insurance premiums that establishes prices based on the overall health of a community rather than focusing on the health status of individual members. This approach means that everyone pays the same premium regardless of their personal health history or risk factors. This can lead to a more equitable system where individuals with higher health risks, such as those with pre-existing conditions, are not charged higher premiums compared to healthier individuals.

In contrast, experience rating relies on an individual's or group's specific health data and claims history to determine premiums. This means that those with a history of more significant health issues may face higher costs based on their past utilization of healthcare services.

Thus, community rating effectively creates a risk pool where healthy and less healthy individuals are charged the same rate, promoting accessibility and preventing discrimination based on health status. This is key to understanding why community rating focuses on broader community health metrics rather than individual-specific health risks.