Why do health insurance premiums increase each year? Not that it helps a lot in being able to keep paying increasing amounts but at least one can understand why it does.
Basically underlying medical costs like paying doctors, more expensive drugs, increasingly sophisticated and expensive testing technology and other factors contribute towards the increasing health insurance premiums.
You may be healthy but the health insurance premiums can still get more expensive. An understanding of how premiums are determined will help explain this.
Each year, the insurer develop profiles of its patients and then works out the cost of each of the profiles. Examples will be male children, age 2 to 6 and women age 45 to 55. Each of these profiles will need different medical attention and based on these profiles and multiplied by the expected number of people they expect to insure for each profile, the insurer can estimate the expected costs.
To this is added the additional amounts for expenses and profits. Then an average cost is calculated per patient or family which becomes your annual premium. Each participating individual or family will pay the same premium amount, regardless of the health of the individual or family.
For those employed, your employer may contribute to the premium cost. If not, you pay the full health insurance premiums. This is assuming that you have no pre-existing conditions that might make you not eligible to be insured.
The health insurance premiums will be much more than what it actually costs for healthy people’s care for the whole year. You may visit the doctor once or get one prescription and still be paying a lot. However, you pay the premiums because you don’t want to take the risk of paying for a major illness or accident.
Those a little less healthy and a bit older might come out even as they may need more medical attention, with the health insurance premiums being closer to the actual cost if you were to pay out of pocket. Here again, people still pay so as not to risk major expense in case of being in an accident or being diagnosed of a major illness.
For those in the sicker, especially if older and sicker, then your premiums are a real bargain. For those with chronic diseases like heart problems or diabetes, or diagnosed with any debilitating disease, the actual cost of care if paid from your own pocket, could be hundreds of thousands of dollars.
For those over age 65 and receiving Medicare, the coverage is a windfall. The care you get is based on you being past retirement age. Many people would have paid into this fund through their working years.
If you look at the population of the entire country, the population is aging and together with that, this group needs more healthcare. Chronic illnesses may have been developed over the lifetime and this age group is more prone to life threatening diseases.
New babies are born daily, but now there are higher incidences of children with autism and other problems which are also adding up to the cost of care across the population.