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I found this, and it was a great starting point for research but I would like to learn about the nitty-gritty details.

For example, obesity is not considered a "pre-existing condition" and is often used to increase premiums. In normal English, obesity is definitely a "condition" and exists prior to someone's initiation of a health insurance plan. This is just one complication from that website.

How do insurance companies know if you truly are a non-smoker? How do they know you haven't gotten fat if you haven't had a physical in 5 years? Do any of them pull your Apple watch data (consentually or non-consentually)? Do they look at when your parents died?

Basically, I would like to learn as much as I can about this without accessing any proprietary information, as I'm sure lots of the serious details are proprietary.

  • Your link indicates obesity is not used to increase premiums, at least under the ACA; that it's explicitly forbidden. "They also can’t take your current health or medical history into account." – ceejayoz May 25 at 15:38
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from the link in your question:

How premiums are set

Under the health care law, insurance companies can account for only 5 things when setting premiums.

  • Age: Premiums can be up to 3 times higher for older people than for younger ones.

  • Location: Where you live has a big effect on your premiums. Differences in competition, state and local rules, and cost of living account for this.

  • Tobacco use: Insurers can charge tobacco users up to 50% more than those who don’t use tobacco.

  • Individual vs. family enrollment: Insurers can charge more for a plan that also covers a spouse and/or dependents.

  • Plan category: There are five plan categories – Bronze, Silver, Gold, Platinum, and Catastrophic. The categories are based on how you and the plan share costs. Bronze plans usually have lower monthly premiums and higher out-of-pocket costs when you get care. Platinum plans usually have the highest premiums and lowest out-of-pocket costs.

Factors that can’t affect premiums

  • Insurance companies can’t charge women and men different prices for the same plan.

  • They also can’t take your current health or medical history into account. All health plans must cover treatment for pre-existing conditions from the day coverage starts.

In the united states especially after the passage of the ACA there no requirement for a physical exam.

The policy rates are set based on the experience of the previous year, and if they expect that the population of customers will be changing. they know their age, zip code and that's about it.

Most policies are group policies. People get them from their employer who has enough employees and their families to be a group, or the employer join a group through a company such as ADP. Other people get their policy via one of the exchanges setup under the ACA, or though a government program such as Medicaid or Medicare.

The people running the group policy try to entice people to be healthy by paying them an incentive to do healthy things. They may pay for a program to quit smoking. Or give them a discount if they use a fitness tracker and meet certain goals. If the group is younger and healthy than the model then they can make more profits. Though profits are limited by the ACA.

When getting a group health insurance policy there has been zero requirement for a physical, or any way to prove that I am healthy. They ask for my DOB, but not my height, weight, or family history. They have no access to Apple watch data, or any other tracker, unless I give it to them.

Obesity of the person is not considered when setting the rate. It is part of the equation for life insurance but not for health insurance.

It can get even more complex for the large corporations because they frequently self-insure. They pay a company for the access to the doctors and hospitals and to process the claims. But the expenses are paid by the employer and the employee.

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  • Awesome answer. Thanks very much. If obesity is not used, then that alone should result in a substantial price cut if a certain policy were to exclude the obese. Definitely worth looking into. – Derek Fulton May 25 at 15:22
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    @DerekFulton They can't exclude the obese. That's illegal. – ceejayoz May 25 at 15:39
  • @ceejayoz That's what I thought too but apparently they can jack up your rates: investopedia.com/articles/personal-finance/030116/… – Derek Fulton May 27 at 14:13
  • @DerekFulton That appears to be a misunderstanding of the ACA. The ACA permits "wellness programs" to be offered with premium reductions as a permitted (and capped) reward. – ceejayoz May 27 at 14:45
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If you're interested in the mechanics of how an insurance company calculates premiums for a given individual, those formulas, called manual rates, have to be filed in most states and are available to the public upon request. Some states, such as Washington, offer a free online service that allows downloading rate manuals. These are typically in PDF form and provide a detailed description of how manual rates are set, including base rates and adjustment factors. See https://fortress.wa.gov/oic/onlinefilingsearch/

Be warned, these documents are often intentionally obfuscated and it takes years of actuarial training to undo attempts to hide information by the part of the filing carrier.

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