Health insurance can be very confusing for many people. I would venture to say that most nurses hate when insurance questions arise with patients. Our objective is to advocate for and facilitate the care that each patient needs no matter what their insurance or financial situation. However, patients often look to nurses for answers to their health insurance questions. And so I have decided to begin a series on health insurance to help us all understand the ins and outs a little better.
I am going to begin with The first component of a health insurance plan, the premium. The premium is how much the insurance plan will cost each year. The dollar amount of a premium is determined in many different ways. Generally speaking though, insurance companies hire very intelligent people who are really good at research and math. They decide how risky it is to provide health insurance. The premiums are created based on that risk making sure that the cost of paying claims does not effect the ability of the insurance company to make a profit.
Group Plan vs. Individual Plan
A group such as a business can decide to purchase a health insurance plan for all of the employees of that business. The more people in a group, generally the lower the health risk. It would be unusual that the majority of the group would experience catastrophic medical expenses. Therefore, group premiums are usually less expensive. The benefit of belonging to a group plan is that the business usually pay a portion of the premium. In other words, If the yearly cost of the health insurance is $1000, the business may pay half of that cost which means the employee would only have to pay $500 per year. The other advantage to the group plan is the employees usually do not have to go through an underwriting process where they have to prove how healthy they are in order to get coverage.
An individual plan is for people who are not able to get insurance through a group. An individual plan can be more specific to the needs of the person or family. The cost of an individual plan premium can vary greatly depending on the risk of the person.
So what do insurance companies consider when deciding how risky it will be to insure someone? There are common factors that most insurance companies evaluate when determining what your premium will be.
- Biometrics: this is a fancy term for height, weight, vital signs and basic lab work. Your Body Mass Index (BMI) is a measure of body fat. A higher BMI can lead to variety of health problems that have been shown to cost a lot of money. Your vital signs, including blood pressure and heart rate, are indicators of your cardiovascular health. In other words, abnormal vital signs might indicate a higher risk for heart attack or stroke. Lab work such as cholesterol and kidney function can also be signs of current or impeding heath conditions. So you can see, when biometrics are not within healthy ranges, you are a bigger risk to the insurance company. As a result, premiums will usually be higher.
- Age: younger individuals are generally more healthy than older people. A premium for a 22 year old with no diagnosed conditions will have a lower premium than a 66 year old who has high cholesterol.
- Gender: Believe it or not, you will find gender discrimination in the health insurance industry. Ironically, women often pay a higher premium than men. This is because women tend to use the benefits of their health insurance. They are more likely to visit the doctor for check ups and take their medications as prescribed. Interestingly though, men tend to suffer more from the top ten US health conditions.
Male : female death rate ratio
- Heart disease
- Chronic obstructive lung disease
- Alzheimer’s disease
- Influenza and pneumonia
- Kidney disease
- Septicemia (blood infection)
- Pre-existing Conditions: Current illnesses or medical conditions have already proven a higher risk. Premiums are almost always higher for those with pre-existing conditions. In some cases, the insurance company may decide to not sell a plan to someone with a pre-existing condition.
- Family History: Those who have serious illnesses or chronic conditions in their family are scored at a higher risk. If someone in your family has had heart disease you then have a higher risk for developing heart disease.
- Smoking / Tobacco Use: Smoking or use of tobacco products in the past or present will almost certainly cost you a higher premium and may prevent being able to purchase insurance at all.
- Profession: A job where someone is around harmful materials such as chemicals or jobs where someone sits for long periods of time can effect the cost of a premium. Certain chemicals can lead to cancer or breathing problems. Sitting for long periods puts people at risk for obesity, back pain and blood clots just to name a few.
- Where you live: For many different reasons, be it industry, environmental factors, state and/or local laws, where you live can impact your risk and thus your premium cost.
How does this fit with the Affordable Care Act (Obamacare)?
As it currently stands, every US citizen is still required to have health insurance coverage. Health insurance companies that participate with the Federal program can still set premiums based on risk, however there is more regulation.
The Affordable Care Act outlines 10 components that must be covered in any Health insurance plan sold through the government program. The components outlined below are quoted and referenced from this website:
- Emergency services: Trips to the emergency room in case of accident or sudden illness
- Inpatient care: Treatment you receive if you’re admitted to the hospital
- Outpatient care: Treatment you receive without being admitted to a hospital
- Care during and after a pregnancy
- Treatment for mental health and substance use disorders
- Prescription medications
- Rehabilitation services from injury, disability, or a chronic condition
- Lab tests to diagnose or monitor an injury, illness, or condition
- Preventive services and management of chronic diseases
- Pediatric services for children under 18, including wellness visits, dental care, and vision care
Insurance companies are not allowed to base the cost of premiums on gender. It is also not legal to look at pre-existing conditions or medical history as a way to deny health insurance coverage or make it unaffordable.
In a nutshell, insurance companies are like professional gamblers. The are experts at their game, they understand the financial risk of the other players and they know how to lower that risk so that they always have a winning hand. The premium is simply what it will cost you to just get health insurance coverage. In our upcoming posts we will discuss deductibles, co-pays, co-insurance.
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