How Healthy People Keep Health Insurance Premiums Low
Everyone buys health insurance to gain access to key benefits like free preventive care, low cost medications and catastrophic financial protection, but you may not realize that you can benefit your insurer and keep your premiums low by taking care of yourself. When you stay as healthy as possible this not only minimizes the number of visits to the doctor and resulting medical expenses, but it also lowers the reimbursement amount that your insurer must pay out. In turn, this lowers the cost of insuring yourself and other policyholders, keeping premiums and out-of-pocket costs at a low rate.
To fully understand this, you need to know how health insurance works. When you get a policy, your insurer asks you to pay a monthly premium in advance of when a health issue compels you to get health care. You may believe that this is a unique relationship between you and your insurer, i.e. only you are paying into a fund that will later be used to compensate medical providers when you need them.
In reality, however, your insurer pools all of the premiums from its policyholders into a combined fund. When any beneficiaries need to pay for medical services, the insurer draws funds from that large pool of money. So, you should really consider yourself merely one policyholder among a large population of insured that share risks and costs.
That is why your premium is dependent more on the characteristics of all beneficiaries in the risk pool, not on just yourself. If all of the insured are relatively healthy, then there will be fewer claims and insurers will charge less to keep policyholders covered. On the other hand, if the risk pool is full of sick people who need to see a physician often, then the coverage costs go up for everyone as a result.
Keeping Your Premiums Low
There are a lot of ways to keep your insurance costs low, but one of the most important is to maintain your health at an optimal level. If you eat right, exercise regularly and get your checkups as you are advised, you can go a long way towards minimizing your medical expenses. You will likely encounter fewer health problems, and when you do, you will find it is easier and cheaper to remedy them because you caught them earlier.
With the passage of the Affordable Care Act, insurers are no longer allowed to charge you more based on how healthy you are, although they can raise rates as you age. Although everyone pays the same for similar health coverage, it is important that you stay healthy to keep premiums low. After all, if everyone thought they could ignore advice from their doctor because they have the luxury of health insurance, then there would be a flood of claims which would drive up premiums for everyone.
You should also keep in mind that insurers are well aware of this. That is why some insurers and employers—who pay more for sicker employees—have created programs that reward policyholders if they meet certain health and fitness milestones. For example, Humana has a rewards program that offers gift cards, fitness equipment and other valuable goods for reaching personal health goals.
How Obamacare Has Increased Premiums
Although there is no arguing the fact that the Affordable Care Act has helped insure millions more—some estimates peg the number at 20 million since 2010—through the Medicaid expansion and the subsidized health plans found on the health insurance exchanges, there is growing recognition that the ACA has also helped raise premiums for almost everyone in the nation. It is estimated that premiums for almost all health plans—both on and off the exchanges—across the country have risen almost 60 percent on average since 2013.
Fortunately, these premium increases only affect a small percentage of the U.S. population. More than 90 percent of insured Americans get their health coverage from employers or government insurers, and 85 percent of the remainder get their insurance off of the Obamacare exchanges along with hefty government subsidies. Both of these groups are largely shielded from any premium increases, leaving about 3 percent of the U.S. population vulnerable to hikes in rates.
For these unfortunate Americans who are largely middle class with incomes too high to qualify for Obamacare tax credits, the Affordable Care Act set off an explosion in health insurance rates that is still on the rise. Plans on the Obamacare marketplaces were priced for policyholders that were government subsidized, but the elevated pricing also raised rates on those plans not on the exchanges. One study estimates that plans rose 14 to 28 percent faster than they would have the ACA had not been enacted.
Another factor that contributed to the rise in premiums both on and off the ACA exchanges was the huge influx of enrollees who were sicker than expected. Although a large fraction of the sicker insured enrolled in the government insurance program Medicaid, many also obtained health insurance off of the exchanges. Once insured, many new policyholders sought out expensive health care to remedy many untreated health conditions and filed claims.
Conversely, fewer younger and healthier Americans enrolled in insurance plans than expected. That left a risk pool of primarily sicker, older policyholders that were costlier to cover. As a result, insurers were faced with rising costs and responded by hiking up premiums. In the few years since Obamacare was enacted, premiums have climbed almost every year and fewer insurers are now participating on the health insurance marketplaces.
Although it may appear that health insurance premiums are destined to rise, there are still few investments that are wiser than health insurance. It is almost a certainty that you or someone in your family will encounter a health issue, and when you do, you want the financial protection that only a robust health insurance policy can provide.
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