Answer: Well Anonymous this is actually a great question that we get asked time and again. The first part of your question is about Premium Increases. On individual health insurance, premiums can only be increased for an entire demographic. So for instance, they can’t target John Doe aged 40 in Miami for his own 30% increase. Either everyone gets it or nobody gets it. But, there can be multiple increases for the same region but in the different age bands. So all the 40-45 year old males might get a 15% rate increase and all 18-24 males might only get a 4% increase. Additionally, when it comes to domiciled health insurance companies (which is all of the health insurance companies that East Coast Health Insurance represents, except United Health Care) their rate increases must be approved by the state. Oftentimes this means absolutely nothing as we have seen 20% increases year over year.
Health Insurance margins are pretty much constant at the industry average of 4% so that is why you might see uneven premium increases across various demographics. This would occur because lets say Cigna had an exceptionally bad loss on 40 – 45 year old males, so they have to hit this demographic harder than others. And, this might only occur in a particular city or county so the difficulties in guessing rate increases becomes even more difficult unless you are able to look at detailed Actuary Tables for the results in a certain demographic.
But to answer the last part of your question individual health insurance premiums can go up as high 30% if they are approved by the State. In practice, however the average annual increase for domiciled health insurance companies is 12%. Many companies like Humana and United Health One raise their premiums 3% every quarter for new enrollments. These increases are passed on to the older members on their policy anniversary date in order to have homogeneous premiums for various demographics.
What makes up premium increases besides claims experience? Inflation (this is the most scary one), rising health care costs (this is the 2nd most scary one), and of course the fact that you are a year older unless you figured out a way to age backwards like Benjamin Button. The scariest thing is that in the next few years health care and health care costs will make up nearly 25% of our GDP unless someone fixes our health care system and the current bill that is headed for the Senate does not even address rising health care costs.
