Why Are Health Insurance Premiums Rising?

From 2000 to 2010, health insurance rates increased a dramatic 113 percent, according to values gathered from a Kaiser Family Foundation survey of employer-sponsored benefits. This means that rates more than doubled, and they have continued to increase since that time. The rising cost of medical care combined with legislation affecting health insurance providers and new technologies hitting the market contribute to this constant increase.

Health Care Legislation

• Health care legislation that places restrictions on insurance providers can lead to increases in insurance premiums. For example, when President Obama passed his far-reaching Affordable Care Act in 2010, insurance providers were no longer allowed to deny coverage to children with pre-existing conditions and were required to accept children on their parent's policies until age 26. They then claimed that these changes, along with others in the bill, greatly increased their risks and costs, and thus forced them to raise their premiums.

Desire to Prolong Life

• Medical technology today allows doctors to prolong life much longer than in past decades. Because of this, an ill individual can be on life support or in ICU for weeks, months or even years. Insurance companies typically cover this treatment if a doctor deems it is warranted or beneficial. This represents a tremendous cost to insurance providers, and as this practice become more common, that cost is passed down to customers.

Increasing Health Care Costs

• Any time the amount of money the population spends on health care goes up, insurance premiums are likely to go up as well, because the insurance provider ends up paying these costs. From 1990 to 2008, the Kaiser Family Foundation estimates the amount of money spent on health care in the U.S. tripled. These increases come for many reasons, including the increased amount of money doctors must spend on insurance and other administrative costs, the longer life expectancy of the average American, the aging population and the increasing prevalence of chronic diseases. Regardless of the reason, the increased cost is passed on to consumers who purchase insurance products.

Improving Medical Technology

• As medical technology continues to improve, the cost of health care will increase. New treatments, medications and technological improvements usually cost more than traditional treatments for disease. Technological advances, such as implanted cardioverter-defibrillator devices used by heart attack patients, can extend life for terminally ill patients, but they cost a significant amount to utilize. In the case of ICD devices, the patient's insurance provider pays $30,000 a year for the device to function as it should. If insurance providers choose to cover new, innovative treatments, they must raise their rates to cover the potential future costs for their clients. (See References 4 and 3)