What does it COST?
STATEMENT - My rates keep going up!
ANSWER - Yes, they do. If you think about it, health insurance protects you against high medical bills. As long as medical costs keep skyrocketing, so will health insurance premiums. There are THREE kinds of rate increases:
Changes in your monthly premium.
Changes in rate tables for new subscribers.
Premium increases due to your advancing age.
Here's the "good" news for holders of individual health care insurance policies:
The amount of your rate increase is unlimited!
The frequency of your rate increases is unlimited!
And here's the "good" news for holders of group health care insurance!
The rates will increase for everyone in the group from 15% to anything.
Rate increases for small group policies are based on "experience", meaning, if your group has stayed healthy, the increases will be small. If you've had some serious issues, expect huge increases.
Group plan companies are always re-negotiating their contracts with their networks. It might be that a group's HMO or PPO network actually has a decrease in rates. When your contract comes around for renewal, have your agent ASK.
STATEMENT - Please explain the rate increases.
ANSWER - First kind of rate increase is a simple "change" here (rates rarely decrease). You get a letter every year with "good news" and "bad news" from your individual policy insurance company. This letter usually tells you of some benefit addition, such as three new doctors and a new urgent care clinic that was added to your network somewhere out of state. Then it whines about rising health costs and informs you of your new (higher) monthly premium. With a small group sometimes the increase is actually partially due to the groups' claims history.
If you read your individual health care policy, you will see this can be done anytime in any amount by simply sending you a letter. It's in your contract! However, to be honest it will generally increase once per year.
The second type of increase becomes visible every time the insurance company prints new "price lists". These rates ostensibly apply to new subscribers just signing on. Well, almost. As soon as the new rates are published for new subscribers, on individual policies, if you have made any claims whatsoever, you will expect to see a rate increase "justified" by the newly printed rate brochures.
The third type of rate increase is a unique "benefit" of individual policies, and applies to individual policies only. It is a rate change based on your advancing age. This can be a significant rate increase and applies whether or not you have had claim ONE! This increase may or may not be timed to occur at the same time as the yearly increase.
From a group policy perspective, the rules are different. By law, rates for everyone in the group policy can go up only the same percentage. That eliminates a big chunk of rate increases right there because actuarially rates flatten out the more folks on the policy!
Because of this, group policies have only the other two kinds of rate increases. BUT, you, personally, can have ONLY ONE of those increases, not both!
There is the general rate increase every year (or maybe twice per year). This is based on the additional cost of health care divided by the number of people in the group. It's just accounting.
Because most people are healthy, the larger the number of people in the group, the less effect rate increases has on the group. It's just math and actuarial statistics. Smaller groups for the same reason can have staggering rate increases - sometimes 300% or more. For this reason, for groups of less than 10 members we also look at individual policies for the members.
The numbers for year 2000 show health care spending averaged about $5,035 per person, according to the report issued by the Centers for Medicare and Medicaid, part of the Department of Health and Human Services. This means that the insurance company must receive in premium around $420 per month per person in the group, minus any co-pays and co-insurance that each person must pay.
