Why do Health Insurance premiums increase Every Year?
Why do Health Insurance premiums increase Every Year?
Paying the premiums for a health insurance plan is one of the significant financial commitments. However, many reasons may lead to an increase in the premium amount.
Some of these reasons are:
●Increasing Costs of Healthcare Treatments
One of the key reasons for the annual rise in health insurance premiums is the ever-increasing cost of medical services. Healthcare procedures like doctor visits, hospital stays, prescriptions, medicines and other medications rise every year, and hence, health insurance companies need to increase their premiums to keep up with the expenses.
Besides, additional expenses like diagnostic tools and specialised treatments also contribute to the overall cost borne by the insurer. Thus, such expenses get passed on to the policyholders.
●Economic Factors and Medical Inflation
Medical inflation is the overall rise in the cost of medical services and goods. Thus, it impacts all aspects of medical services, ranging from prescriptions to hospital stays, surgeries, etc., which eventually leads to an increase in health insurance premiums.
Besides, other economic factors that affect the costs of living, such as increasing wages for healthcare professionals and operational costs, also lead to higher premium amounts.
●Rise in Healthcare Demand with Age
It is common for premiums to increase with the ageing of policyholders since people tend to be more prone to injuries and diseases as they start to age. Hence, with such increased risks associated with the policyholder, the premiums also become costlier.
●Regulatory Policy Changes
Opting for policy renewal to include more facilities in an existing health insurance plan can also lead to higher premiums. It is because comprehensive healthcare plans provide you with overall coverage for a wide range of treatments, where the insurer needs to bear higher expenses.
Also, any kind of enhancement or regulatory changes made in the health insurance plan can be responsible for an increase in the premiums.
●Administrative Costs
Several types of administrative costs are associated with running and managing health insurance companies. Besides, health insurance providers also need to bear other operational costs to process their customers' claims, maintain their customer service team, broaden their network of hospitals, etc.
Thus, with the increase in such administrative and operational costs, policyholders experience a rise in their health insurance premiums.
●Risk Assessment and Claim History
Premiums for a health insurance plan are also influenced by policyholders' claim history. After conducting a thorough assessment of the risk associated with them, their premiums are determined.
So, if you have a claim history where you claim coverage quite frequently, you will more likely have higher premiums to pay.
In the process of paying the premiums for a health insurance plan, it is important to ensure you do not exhaust your savings. Therefore, understanding the factors responsible for the rise of premium amounts also enables you to draft a realistic budget for yourself.