If insurance premiums are based on an experience rating,
A) every firm in a given area pays the same price for medical insurance.
B) insurance premiums are based on the past medical bills of a firm's employees.
C) firms have no incentive to try to lower the health care costs of their employees.
D) firms will not be concerned with the health problems of job applicants.

Question

Quizplus · Accepted Answer

Insurance premiums based on experience rating means that the premiums a firm pays is based on the health care costs incurred by its employees in the past. This provides an incentive for firms to try to lower healthcare costs by promoting employee wellness and preventive care, as it will lead to lower premiums in the future. Therefore, option B is the correct choice. Option A is incorrect because insurance premiums are not the same for all firms. Option C is incorrect because firms have an incentive to lower healthcare costs. Option D is incorrect because firms are concerned with the health problems of their job applicants as it may affect their healthcare costs.

If Insurance Premiums Are Based on an Experience Rating