What is meant by "age band rating" in health insurance?

"Age band rating" refers to a pricing strategy in health insurance that adjusts premiums based on the age of the insured individuals. This method acknowledges that older individuals typically have higher healthcare costs due to increased health risks and potential medical needs. Consequently, premiums are structured in bands or categories that correspond with specific age ranges.

This approach allows insurers to set rates that more accurately reflect the expected healthcare utilization of different age groups. For instance, a younger insured person might pay a lower premium compared to an older insured individual, who may have higher anticipated medical expenses. By using age bands, insurers can balance risk and ensure that premiums are commensurate with the coverage that different ages may require.

In contrast, the other options do not accurately define "age band rating." The concept does not relate to rating insurance fraud risk, provide discounts for family plans, or describe a policy feature for long-term coverage. Understanding age band rating is crucial for recognizing how health insurance pricing works and the factors influencing premium determinations.