Health insurance is worth the cost. Paying your monthly premiums can mean the difference between having your medical emergencies or chronic conditions covered, or being hit with huge medical bills and possibly even bankruptcy. As with many things that are worth having, healthcare doesn’t come cheap, and almost every year health insurance companies raise insurance premiums and other rates. Multiple factors go into how insurance companies calculate your premiums, and there are multiple reasons that rate rise.
How Premiums Are Calculated
To determine how much they will charge for premiums, insurance companies have to figure out how much it will cost them to cover their customers’ healthcare costs, plus how much it will cost them to run their business. Your premiums will go towards both of these costs. But while they generally know how much their administrative costs (such as employee salaries) will be, they need to calculate how much it will cost to pay for their customers’ healthcare needs. To do this, an insurance company will first develop a profile of all their consumers. Then they figure out how much each patient group will cost to cover, factoring in doctor visits, vaccines, and any future medical expenses.
For example, insurance companies might group women in their late 50s and 60s together, and take into account their need for mammograms and yearly checkups with lab tests. They will also consider that older women might need medications for cholesterol or heart problems, might possibly need surgeries, or have accidents. They do these calculations for all patient groups. After all the calculations are complete, health insurance companies will multiply these costs by the number of patients that they are insuring in each profile group and estimate how much costs will be.
Ultimately, your health insurance premiums will be calculated based on your profile group. Your insurance company will look at:
- Your age– the older you are, the higher your premium.
- If you or your spouse smokes– if you are a regular smoker, or were one within the last 12 months, an insurance company can increase your premium rate. Some companies charge a tobacco surcharge, which can be as high as 50%.
- How many children you have to insure and their ages– health insurance companies take into consideration your children’s ages and account for things like stitches, falls, and sports injuries that they may need care for as they grow.
- Your location– the more health insurance companies there are competing for business in your area, the lower your premiums will be.
Why Premiums Go Up
When your insurance rates go up, inflation is usually the culprit. Recent rises, though, have been due to other factors. One of these factors is that, because of advances in medicine and technology, people are living longer now than in the past. Not only are there more people to cover, but these people may be older and more in need of medical care.
People who receive treatment and live longer consume more healthcare dollars, meaning that everyone else has to throw more money into the pot to help insurance companies cover costs for older people. In addition, while the ACA’s rule that insurance companies cannot turn someone down due to pre-existing conditions was great for expanding coverage, it also meant that more people with ongoing health issues joined the insurance pool.
Recent rate raises are not only due to who is being covered, but also how insurance companies cover their costs. The government had been supplying subsidies to insurers to help reduce their costs and these subsidies are ending. Because insurance companies will have to make up the difference, they have been raising premiums by 4-7%.
How You Can Lower Your Premiums
You should review your coverage every year during the health insurance open enrollment period. Calculate the cost of premiums, copays, and deductibles and see if you could save money with another plan. Also check for any tax incentives that can help you save money.
If you are relatively healthy, and under 30 or in need of financial assistance, then a catastrophic plan might work best for you. These plans have high deductibles and low monthly premiums. If you need a more comprehensive plan, there might be one in your area that will provide the right coverage at a better price than you’re paying now.
You could be saving hundreds of dollars just by switching to a different plan. When you’re ready to compare all the health insurance options in your area, EZ.Insure is here to make the process quick and easy. We go over all available plans and direct you to a quality plan that will not only cover your needs, but also save you more money than your current plan. Our trained licensed agents will do all the work for you, for free. No need to worry or stress yourself out researching and comparing. To get your free quotes, enter your zip code in the bar above, or to speak to an agent, call 888-350-1890.