What Is an ACA Rating Area? How Geography Sets Your Premium

An ACA rating area is the geographic region a state uses to set individual and small-group health insurance premiums under the Affordable Care Act. There are more than 500 of them across the country. Where you live places you in a rating area, and that area is one of the few things an insurer is allowed to use to decide what you pay.

How rating areas are defined

Each state sets its own rating areas. Most states draw them along county lines, but a state may instead use metropolitan statistical areas (MSAs) or three-digit ZIP code groupings. If a state did not establish its own, the federal default is MSAs plus the remainder of the state. The number of areas per state ranges widely, from a single statewide area to several dozen.

What insurers can and cannot use to set premiums

The ACA sharply limits how premiums may vary. Insurers may adjust price based only on:

• Rating area — the geographic region described above.
• Age — up to a 3:1 ratio between the oldest and youngest adults.
• Tobacco use — up to a 1.5:1 ratio, where a state permits it.
• Family size — based on who is enrolled.

Notably, insurers cannot charge more based on health status, medical history, or gender. That is what makes rating area so powerful: with health status off the table, geography and age do most of the work in explaining why premiums differ.

Why rating areas matter for ICHRA

Because ICHRA reimburses employees for individual-market plans, its value rides entirely on local premiums, which are set by rating area. The ACA affordability test that determines whether an ICHRA offer is "affordable" is based on the lowest-cost Silver plan in the employee's own rating area and age. For an employer with workers spread across the country, that means the same ICHRA allowance can be generous in one area and inadequate in another.

Getting this right requires premium and network data down to the rating area, county, and ZIP, which is the foundation of our individual market Data and the engine behind ICHRA Model.

Frequently asked questions

How many ACA rating areas are there?

There are more than 500 rating areas across the United States. Every state has its own set, ranging from a single statewide area to several dozen, and the U.S. total is just over 500 when all states and the District of Columbia are combined.

How is my rating area determined?

Your rating area is based on where you live, using your home address. Most states define rating areas by county, so your county places you in a rating area. Some states use metropolitan statistical areas or three-digit ZIP code groupings instead.

Why do premiums vary by rating area?

Premiums reflect the local cost of care, how much competition there is among hospitals and doctors, and which insurers participate in that area. A region with high provider costs or few competing carriers tends to have higher premiums than a nearby area with more competition, even within the same state.

Why do rating areas matter for ICHRA?

ICHRA reimburses employees for individual-market plans, and those premiums are set by rating area. Whether an ICHRA allowance is generous or thin, and whether it beats a subsidized Marketplace plan, depends on local premiums. The ACA affordability test even uses the lowest-cost Silver plan in the employee’s specific rating area, so geography is usually the first factor to check.