Final answer:
An insurer issuing a guaranteed renewable individual health insurance policy agrees to renew the policy indefinitely, but can still adjust premiums for the class of policyholders. State insurance regulators can influence premium rates, but interventions to set low premiums can result in insurance companies withdrawing from markets or avoiding high-risk individuals.
Step-by-step explanation:
When an insurer issues an individual health insurance policy that is guaranteed renewable, the insurer agrees to renew the policy indefinitely. This means the insurance company must continue renewing the policy as long as the premiums are paid on time, without forcing the insured to pass a physical examination or otherwise requalify for coverage. However, this does not restrict the insurer from increasing premiums for the entire class of policyholders, which can happen due to factors like inflation, increased overall healthcare costs, or changes in the risk profile of the class of insured persons.
Understanding Premiums and Coverage
In terms of premiums, if insurance is set at actuarially fair levels, groups that pose a higher risk would naturally pay higher premiums. For instance, people with chronic conditions or elderly individuals would be charged more because their expected healthcare costs are high. Insurance companies must balance the need to charge premiums that reflect the risk they're insuring against the reality that exorbitant premiums might lead to certain groups forgoing insurance altogether.
State insurance regulators may intervene to establish lower premiums, which can lead to insurers avoiding medium and high-risk individuals or exiting the market if forced to sell at unprofitably low prices.