Understanding Why Premiums Increase

Premium rate increases affect everyone, even those who don’t use benefits frequently. Some members use more benefits than they pay in premiums. Others use less.

Health insurance companies use their loss experience and analysis to predict the medical expenses for any group of people covered by the same insurance product. Premiums are developed by projecting past claims into the future to determine the amount of expected claims.

Benefit expenses, or what insurance companies pay health care providers for health services and products, are a key component in premiums. You might be surprised to learn that it’s more than price that drives rising health care costs. Other factors such as utilization, intensity, selection and leveraging impact benefit expenses and ultimately insurance premiums.

Move your mouse over the chart to view more about each of these factors:

Confused?

Take a look at this simple analogy. (View time: 8 - 10 minutes. File size: 800K)