What Makes Your Health Insurance Rise?

If you develop a sudden illness or need medical treatment as you get older, your health insurance will help prevent the cost of care from becoming more than you can bear. Insurance providers use a number of factors to determine rates, and there are many reasons that your premiums can go up from year to year.

Risk Factors

• One of the biggest factors that can cause your health insurance cost to rise is an increase in the likelihood that you'll make a claim. This happens naturally as you age and more from a low-risk pool into a higher-risk pool based on your age, gender and medical history. If you take up smoking and report this fact on your health insurance application, you'll likely see your premiums rise. The same holds true if you stop participating in a wellness program that was the source of a discount in the past.

Legislation

• Federal and state laws frequently impact health insurance providers and the rates they charge. For example, laws that require employers to provide health insurance for their workers add more healthy individuals to the health insurance risk pools and allow insurers to lower rates. However, the expiration of similar laws causes rates to rise. Likewise when legislators choose not to enact laws that limit rate increases or require insurance companies to spend a certain amount of the money they receive on paying claims, rates can increase to reflect adjustments to a health insurance provider's business model.

Costs of Care

• Health insurance is responsible for paying for medical care that policyholders receive. As the cost of care rises, health insurance companies must raise their rates to continue making a profit. This happens when hospitals and health care providers raise the fees they charge for routine screenings and procedures. It also reflects doctors' rates, which rise along with the cost of doing business and the rising expense of medical malpractice insurance. Prescription drug prices also influence the cost of health insurance; new, more expensive name brand drugs translate into higher premiums, even for those who don't need them.

Inflation

• Finally, inflation causes health insurance rates to rise to reflect the changing value of the dollar. Because you're likely to have a health insurance policy for many years, the dollars that you pay for it when you first sign up are likely to be worth considerably less one decade or two decades in the future. Even when health insurance costs don't rise as a percentage of your income, they will still go up eventually to reflect inflation.