Why Do Health Insurance Premiums Go Up Every Year?

Health insurance is worth the cost. Paying your monthly premiums can mean the difference between having your medical emergencies or chronic conditions covered, or being hit with huge medical bills and possibly even bankruptcy. As with many things that are worth having, healthcare doesn’t come cheap, and almost every year health insurance companies raise insurance premiums and other rates. Multiple factors go into how insurance companies calculate your premiums, and there are multiple reasons that rate rise. 

How Premiums Are Calculated

different analytics with calculator and graphs and a hand holding a pen.
Insurance companies will first develop a profile of all their consumers to calculate costs.

To determine how much they will charge for premiums, insurance companies have to figure out how much it will cost them to cover their customers’ healthcare costs, plus how much it will cost them to run their business. Your premiums will go towards both of these costs. But while they generally know how much their administrative costs (such as employee salaries) will be, they need to calculate how much it will cost to pay for their customers’ healthcare needs. To do this, an insurance company will first develop a profile of all their consumers. Then they figure out how much each patient group will cost to cover, factoring in doctor visits, vaccines, and any future medical expenses. 

For example, insurance companies might group women in their late 50s and 60s together, and take into account their need for mammograms and yearly checkups with lab tests. They will also consider that older women might need medications for cholesterol or heart problems, might possibly need surgeries, or have accidents. They do these calculations for all patient groups. After all the calculations are complete, health insurance companies will multiply these costs by the number of patients that they are insuring in each profile group and estimate how much costs will be. 

Ultimately, your health insurance premiums will be calculated based on your profile group. Your insurance company will look at:

  • Your age– the older you are, the higher your premium.
  • If you or your spouse smokes– if you are a regular smoker, or were one within the last 12 months, an insurance company can increase your premium rate. Some companies charge a tobacco surcharge, which can be as high as 50%.caucasian dad kneeling down to tie his daughters cleat., who is in soccer uniform.
  • How many children you have to insure and their ages– health insurance companies take into consideration your children’s ages and account for things like stitches, falls, and sports injuries that they may need care for as they grow. 
  • Your location– the more health insurance companies there are competing for business in your area, the lower your premiums will be.

Why Premiums Go Up

When your insurance rates go up, inflation is usually the culprit. Recent rises, though, have been due to other factors. One of these factors is that, because of advances in medicine and technology, people are living longer now than in the past. Not only are there more people to cover, but these people may be older and more in need of medical care.

caucasian mans hand holding a prescription pill bottle pouring meds into his hand
People who receive treatment and live longer consume more healthcare dollars.


People who receive treatment and live longer consume more healthcare dollars, meaning that everyone else has to throw more money into the pot to help  insurance companies cover costs for older people. In addition, while the ACA’s rule that insurance companies cannot turn someone down due to pre-existing conditions was great for expanding coverage, it also meant that more people with ongoing health issues joined the insurance pool.

Recent rate raises are not only due to who is being covered, but also how insurance companies cover their costs. The government had been supplying subsidies to insurers to help reduce their costs and these subsidies are ending. Because insurance companies will have to make up the difference, they have been raising  premiums by 4-7%.

How You Can Lower Your Premiums

You should review your coverage every year during the health insurance open enrollment period. Calculate the cost of premiums, copays, and deductibles and see if you could save money with another plan. Also check for any tax incentives that can help you save money. 

If you are relatively healthy, and under 30 or in need of financial assistance, then a catastrophic plan might work best for you. These plans have high deductibles and low monthly premiums. If you need a more comprehensive plan, there might be one in your area that will provide the right coverage at a better price than you’re paying now.illustration of a business man standing in the middle of a scale with money sign on one side and clock on the other.

You could be saving hundreds of dollars just by switching to a different plan. When you’re ready  to compare all the health insurance options in your area, EZ.Insure is here to make the process quick and easy. We go over all available plans and direct you to a quality plan that will not only cover your needs, but also save you more money than your current plan.  Our trained licensed agents will do all the work for you, for free. No need to worry or stress yourself out researching and comparing. To get your free quotes, enter your zip code in the bar above, or to speak to an agent, call 888-350-1890.

Healthcare Mergers Continue, What This Means For Consumers

Healthcare boundaries have recently begun to blur, starting with CVS and Aetna merging, and continue to blur. Insurance companies, doctors, and hospitals have teamed up in order to cut costs due to the Republicans halting subsidy payments. The halt will cut some federal programs funding. Now, UnitedHealth has plans to buy a large physician group, DaVita. These mergers are an attempt to provide quality care for consumers at affordable lower costs.

Because Republicans halted subsidy payments, companies are beginning to merge.
Because Republicans halted subsidy payments, companies are beginning to merge in order to save and provide quality care.

First CVS and Aetna have plans to create “hubs” for customers to come in and receive care, which will result in better care at a lower cost. Now, joining the bandwagon, UnitedHealth’s Optum unit plans to merge with DaVita to do the same.

The Plan

UnitedHealth Optum manages pharmacy benefits and provides health services. The merge will now add more doctors to UnitedHealth’s existing 30,000 doctors, giving people more variety within their network.

DaVita is a for-profit organization that has chains of dialysis centers. They operate nearly 300 clinics that serve 1.7 million patients across six different states. The states are California, Florida, Colorado, Washington, New Mexico, and Nevada. They will add to UnitedHealth’s 250 Med Express urgent care centers and 200 surgical centers.

“I am so proud of the DaVita Medical Group accomplishments, including our excellent clinical outcomes,” said Kent Thiry, DaVita chairman and CEO. “The combination of DaVita Medical Group and Optum should lead to even higher levels of performance.”

In a statement, Larry C. Renfo, Optum’s chief executive said “Combining DaVita Medical Group and Optum advances our shared goal of supporting physicians in delivering exceptional patient care in innovative and efficient ways.”

The merge between UnitedHealth and DaVita is hopeful for the future of healthcare costs and care.
The merge between UnitedHealth and DaVita is hopeful for the future of healthcare costs and care.

When This Will Happen

The $49 billion merge is expected to close next year.  The goal is to offer clinics that give a lot of the same care an emergency room at much lower rates. They will offer nearly 50 percent cheaper costs for procedures such as outpatient surgery.

Other industries are taking note of UnitedHealth Optum’s move, making it appealing for them to create a design of their own possible merge. As insurance companies, doctors, hospitals, and pharmacies begin to unite, it seems that not only will they benefit, but consumers as well. Healthcare lines continue to blue with these mergers. If all goes accordingly, then consumers will be offered a large range of doctors, and quality care at almost half the costs.

Healthcare Rates to Rise in 2019

In 2017 when President Trump did away with cost-sharing subsidies, it forced insurers to raise premiums. The cost-sharing subsidies helped pay back insurers for giving customers lower premiums due to their income status. Due to the halt in the subsidies, health-insurance premiums have been rising for those who have to buy their own insurance, approximately 34% in 2018 for silver plans. Insurers are now brainstorming what they will charge and if they want to participate in the ACA exchanges for 2019.

Insurers have been participating less and less in the market exchange, leaving customers with fewer choices. If more insurance companies decide to pull out of the exchanges, it will mean that customers will have even fewer choices available to them, at higher costs.

Premiums will continue to keep growing without the cost-sharing subsidies to help with the costs impacted on insurers. The hike in premiums could be as much as 30% for 2019. It is projected that those that will be impacted the most are those who make too much money to qualify for premium support subsidies.

Eyles and Ceci Connolly, president and CEO of Alliance of Community Health Plans both voiced their disappointment of Congress failing to take action to fund cost-sharing subsidies.

“What’s happened is that several pieces of the puzzle have been pulled away. It is hard for me to isolate CSRs, what we are looking at now is a puzzle that is falling apart piece by piece,” Connolly said. “Losing the individual mandate, losing the cost sharing reduction subsidies and losing any hint of reinsurance, not to mention the risk corridors that were already gone, you’re just running out of options to manage the cost of this program.”

Midterm elections are approaching which brings up the issue of health care. While both political parties will be criticized, the polls have shown that voters hold Republicans more responsible for the high costs. Both parties have come to an agreement to include health insurance funding in the spending law, but could not agree on the details of what to fund exactly. Republicans are pushing for abortion restrictions stating insurers can cover abortions but cannot use federal funding for them, while Democrats do not agree.

Lawmakers are hoping the stabilization effort of adding funding to the bill to offset the costs of insurance, but health-policy experts disagree on how much it will help. Health experts state that the higher premiums will be offset for people by other subsidies they will be qualified for.

Republicans are not thrilled to stand behind the idea of the stabilization funding because they view it as saving the insurers of a health law, ACA, which they promised voters they would repeal. They blame the ACA’s regulations which stopped competition and drove up premium costs.  Congress is leaning towards unlikely passing the stabilization bill.


Insurers are expected to announce the premium price hike sometime in the fall.