Health · Chapter 19 · Premium Calculation
Health Premium Formula (M − I + E)
Definition
Health insurance premiums are calculated as Morbidity − Interest + Expenses. Morbidity predicts claims; interest earned on invested premiums LOWERS the rate (the higher the assumed interest rate, the lower the premium); expenses (the load) are added back. Premiums are the periodic payments that keep a policy in force and are always paid in advance.
In plain English
Start with expected claims, subtract investment earnings, add the cost of running the company.
Exam tip
Life premiums use MORTALITY (death); health premiums use MORBIDITY (sickness/disability). Higher ASSUMED interest → LOWER premium — the exam loves flipping that direction.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms