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Health insurance rates increased in recent years to the dismay of consumers. It boggles the minds of many since insurance companies cannot increase your rates based on illness or pre-existing conditions, thanks to the Affordable Care Act. So what is making the cost of health insurance continually increase?
Keep reading to find out the most common reasons.
The Top Costs Driving Health Insurance Costs Up
Health insurance rates have increased significantly because the cost of many factors influencing health insurance has risen recently, including:
- Healthcare – The cost of healthcare itself is astronomical compared to other countries. The US spends an average of $3.5 trillion per year on healthcare. That equals $10,739 per person in the United States. This is approximately double the cost of healthcare in other industrialized countries around the world.
- Administrative costs – As the cost of living increases, so do the administrative costs involved in offering health insurance. The health insurance companies must pay its employees, rent the office space, cover the technical needs of the company, and ensure that they meet all legal requirements. All of these costs add up and get passed along to the insured.
- Marketing – The health insurance industry is competitive. In years’ past, it was just your major insurance companies that handled the insurance needs of consumers. Today there are thousands of insurance companies competing for your business, which means they each have to drop a decent amount of money on marketing in order to get the business. Again, the costs get passed on to the insured in the premiums charged.
- Cost of medical care – As the cost of medical care increases, the cost of insurance must rise accordingly if insurance companies want to stay in business. In addition, insurance companies pay providers on a fee-for-service basis, which prompts healthcare providers to order more tests and procedures than may be necessary.
- Costly Preventative Care – Preventative care is widely encouraged, and insurance companies often cover these visits at 100%. While the visit may be ‘free’ to you, someone has to foot the bill. Insurance companies pay for the services, while increasing premiums accordingly in order to be able to offer the ‘free services.’
Personal Reasons Your Healthcare May be Expensive
In addition to the general reasons health insurance rates increased overall, there may be personal reasons that your insurance rates continually rise.
- Age – One remaining factor that the Affordable Care Act allows insurers to increase premiums for is age. As you get older, you typically need more medical care. This means more money out of the insurance company’s pockets for covered services. Insurance companies typically charge higher premiums for older clients in order to cover these higher costs.
- Lifestyle habits – Let’s face it, if you have ‘bad’ lifestyle habits, you are a higher risk for insurance companies. Smokers, drinkers, and those that have risky occupations pose a higher risk of costing the insurance company money. Insurance companies typically adjust premiums to adjust for these risk factors.
- Location – The cost of living varies throughout the United States. If you live in a ‘high-cost area,’ you’ll pay higher insurance rates. You’ll also pay higher rates if you live in an area where there is little competition for insurers versus an area with loads of competition that would prompt insurance companies to lower the prices to steal business from competitors.
- The plan chosen – Whether you get your insurance from the Marketplace or your employer, you typically have options. Some plans have high premiums but low out of pocket expenses when you see the doctor. Other plans have lower premiums, but higher out of pocket costs when you see a healthcare provider.
Ways to Lower Your Health Insurance Costs
Just because health insurance is expensive, doesn’t mean you have to pay the highest rates out there. Using the tips below, you can lower your health insurance premiums:
- Change your lifestyle habits – If you smoke, drink, do drugs, or participate in any risky hobbies, stop. Show the health insurance company that you no longer participate in these hobbies and watch your premiums decrease after 12 to 24 months.
- Consider a higher deductible – If you don’t visit the doctor often and you can afford a high deductible, consider changing plans. Why pay more monthly than necessary, especially if you don’t use the insurance often?
- Choose an HMO – If you don’t mind visiting your primary doctor for everything, an HMO policy may offer the lowest premiums out of any policy. You won’t be able to see a specialist without a referral from your primary doctor, but if that doesn’t bother you, consider it as an option.
- Shop around – There are literally thousands of insurance providers and brokers out there today. Shop in person, over the phone, and online to get the best deal. Compare your options carefully, looking at premiums, deductibles, co-insurance amounts, and out-of-pocket maximums to find the plan that’s right for you.
Health insurance costs are continually rising, but there are ways you can keep them under control. Knowing what to look for and what features you need can help you make the right choice. The Affordable Care Act strives to keep insurance affordable, but that doesn’t take away the need to do the legwork and shop around yourself.Get the right insurance coverage.