What Goes Into Your Health Insurance Premium?

Each year, you have probably noticed that your health insurance premium changes. Even if you start out with a relatively low premium, over time it starts to creep up.

Every year, your policy is reviewed, and your health insurance provider decides whether or not your premium should be raised. A number of factors go into this decision. If you are considered bigger risk, your premium might go up quite a bit. On the other hand, if you haven’t presented much of a risk, you will probably only see a smaller increase.

Factors that Influence Your Health Insurance Premium

There are a number of factors that go into your health insurance premium. And, as your situation changes, your health insurance provider can charge you more. If it looks as though the insurance company might be likely to make a payout on your behalf, it is more likely to raise your premium. Here are some of the things taken into consideration when setting your health insurance premium:

  • Your physical health: First of all, your physical health is considered. Are you overweight? Do you smoke? These items mean you are at greater risk for some (often expensive) conditions, and your premium will reflect that. If you are generally in good health, you will usually see better rates.
  • Number of claims over the course of the year: For renewing customers, insurance providers take into account the number of claims you have had. If it appears that there is a trend toward more claims, you will see your premiums rise.
  • Deductible amount: What you are willing to pay out of pocket affects your premium. The more you are willing to pay, the less you pay in premiums. If you want to reduce your premium, raise your deductible.
  • Pre-existing conditions: This mainly affects your initial rate when you sign up. However, it means that you have a higher base premium — and your premium can only go up from there.
  • Age: I was terribly disappointed when I turned 30 and the insurance company upped my premium. Even though nothing had changed about my situation, and I was still healthy, and I rarely have even one visit outside my yearly checkup, my premium still went up because age means a greater possibility that something could go wrong.
  • Where you live: The general demographics of your locality can influence your insurance rates. If you live in an area that has a general trend of unhealthy or risky behaviors, your own premiums will be higher — even if you lead a healthy lifestyle. Local laws, and requirements, can also add to the cost.
  • Gender: Because women are, statistically, more likely than men to actually seek medical help (office visits, prescriptions, etc.), they are charged more. Additionally, women run the extra risk of becoming pregnant, and health insurers take that into account.
  • Family composition: The number of people in your family, as well as their ages matter. If you have two or three small children, you are likely to see a higher premium, since they are prone to sickness, injury, and other issues.
  • Administrative costs: Even if nothing about your family or health changes, you are still likely to see premium increases, since health insurers routinely pass on any changes in so-called administrative costs — from an increase in the cost of office supplies to a higher salary for the CEO or other workers — to customers.
There are other factors that go into your health insurance premiums, and it helps to be aware of them, and consider how you can offset them.

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