Understanding Your Health Insurance Costs and What Drives Them

We often get questions from our members about how health insurance premiums, the amount you pay each month, are set. Perhaps a good way to help explain this is to think about how your car insurance rates are set. If you ever bought car insurance you know that your premium is based on things such as your age, sex, what type of car you drive, how many people will be on your plan, where you live, and more.¹

Like car insurance companies, health insurance carriers have many things that they look at when setting rates too.²

• Age – Premiums can be higher for older people than for younger ones because they often use more health care services than others.
• Location – Where you live can impact your premiums. The number of insurance companies that offer plans in your area, state laws, and cost of living can influence healthcare costs.
• Tobacco use – Health plans may charge tobacco users more than those who don’t use tobacco.
• Number of people covered on your plan – Members often pay more for a plan that also covers a spouse and/or children.
• Type of plans offered – Plans can have different deductibles, co-pays and out-of pocket maximums. The premiums may differ based on the type of plan that you choose.

There are also larger healthcare industry trends that impact how much we all pay for health insurance. Here’s just a few:

• New health care technology – Since the 1960s, technology has been a major reason for the increase in health care expenses. The costs for new technology investments (sometimes in the millions per hospital) are often passed on to the consumer.³
• Increase in chronic conditions – Almost half of the people in the U.S. have one or more chronic conditions like asthma, arthritis, diabetes or heart disease. These chronic conditions are more expensive to treat. They cost the U.S. healthcare system an extra $1 trillion dollars per year. ³
• Insurance fraud – It’s estimated that health insurance fraud costs the U.S. roughly $100 billion per year.³ As fraud grows, healthcare costs rise and those costs can be passed onto the buyer.

So as you can see, there are a number things that impact healthcare and health insurance costs. Some of the ways you can help keep costs down are:

• Be as healthy as possible
• Use doctors in your plan’s network
• Take advantage of tools that help you know more about treatment options. Visit azblue.com/member to learn more about these tools.

Sources:

1. Seven Factors Affecting Your Car Insurance Premiums, https://learningcenter.statefarm.com/auto/7-factors-affecting-your-auto-insurance-premiums/

2. How insurance companies set health premiums, https://www.healthcare.gov/how-plans-set-your-premiums/

3. Why is your health insurance so expensive, http://carrington.edu/blog/student-tips/finance/why-is-your-health-insurance-so-expensive/