Group Health Insurance - What's Going on to My Healthcare?
Small business owners have been struggling to survive the Great Recession that crippled the United States economy since 2007. Employers have had to deal with cutting labor costs, losing revenue and incurring higher business expenses. One of those expenses is the cost of providing health insurance benefits for their employees. In order to understand why insurance premiums are rising, knowing the criteria that insurance companies use to set their rates will explain why health insurance is becoming unaffordable for many employers and employees.
Factors Used to Set Premiums
Health insurance companies assess the present and past medical conditions of a group or individual in a method called health status rating. The existence of chronic diseases and illnesses will augment premiums. After the initial rate has been set, the premium could increase or decrease based on the number and amount of claims that were filed during the coverage period.
Older individuals are charged higher premiums than younger ones. Women who are in their childbearing years pay more for insurance than men. Higher rates are charged for people who live in cities and states where the cost of health care is considered expensive. These are all examples of demographic rating. The factors used in demographic rating are continuously used to set insurance rates for policy renewals.
Employees who work in occupations and industries that have a high exposure to injuries are likely to pay more for their health insurance than someone who does not perform work that is considered dangerous or risky. Setting rates based on the type of work someone performs is called industry rating. This practice is common in group plans but is also used in charging premiums based on an individual’s line of work.
Durational rating occurs when someone has been in a health plan for more than a year. When an insurance carrier can no longer exclude preexisting conditions, it will increase premiums to cover the cost of providing medical care for those conditions. The insurance company wants to be sure that any future medical costs that cannot be predicted in the initial application will be factored into the current rate(Focus on health reform: Kaiser Family Foundation, 2012).
Health Insurance Costs Are Still Rising
The Great Recession officially ended in June, 2009 but small businesses are still dealing with the disparity between economic recovery and rising health insurance costs. Health insurance premiums are still rising because of several factors stemming from health care technologies, an aging population, a demand for more insurance coverage and a smaller privately paid portion of costs. Unnecessary and excessive testing and medical procedures are more prevalent in the United States health care system. More widely used electronic health information systems would improve the way patients are treated by giving physicians, hospitals and pharmacies historical medical data on patients. Even though some economists have stated that the Great Recession is over, there are still high numbers of unemployed individuals who have lost their health insurance coverage and cannot afford health care. Insurance agents have reported that there is a decrease in the amount of small businesses that are enrolling their employees in major medical policies and there are fewer insurance carriers because of consolidation of underwriters of health insurance. With no signs of health insurance costs decreasing, small business owners must find ways to deal with the problem(Health care costs: Key information on health care costs and their impact: Kaiser Family Foundation, 2012).
How Small Businesses Are Dealing With High Insurance Costs
Small business owners must concentrate on how to keep their businesses from closing and how to stop the depletion of their business investments. Reducing health insurance costs is the logical approach to staying within a budget that will allow a business to provide their employees health insurance coverage which ranks high on the list for the most valued employee benefits. The most common solution to reducing health insurance premiums is to increase exclusions and limit coverage. Changes in prescription drug plans, hospitalization coverage and mental health treatment are some ways that health insurance policies have been trimmed to meet the budgets of small business owners. Higher deductibles are showing up in larger numbers of group plans and the percentage of out-of-pocket costs paid by insured individuals is also increasing. Employees must realize that medical insurance coverage is a benefit that has a high price tag for both employers and employees(Survey of health insurance agents:Kaiser Family Foundation, 2012).
The Highly Debated Affordable Care Act
As of January 1, 2014, health insurance carriers will be allowed to adjust premiums only on the basis of the following four components: individual or family enrollments, geographic areas, age and tobacco use. The previously used factors such as gender, and preexisting conditions will not be permitted. The ACA will allow states to implement stricter standards for rate adjustments. So far rate restrictions are showing up more in the small group market than in the individual market. The opponents and the proponents of the Affordable Care Act all have valid points and concerns but the United States must come together to achieve a more affordable health care system for everyone(Focus on health reform: Kaiser Family Foundation, 2012).
Gone are the days when small businesses would reward their employees with company paid health insurance. It is now a fact that small business owners must pass on a larger portion of the cost of health insurance to their employees. There is an obvious message in the discussion of health insurance costs. A balanced diet, a regular exercise routine and an overall wholesome lifestyle are the fundamental ways medical costs can be reduced.