Are health insurance premiums really too high?

Health insurance premiums have risen steadily over the past decade, leading many to claim that we are overpaying for health care. However, the recent increase in health care premiums is in line with the increase in health care costs.

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Factors that contribute to rising health care costs include an aging population, increased advances in medical technology, and the development of more sophisticated and more expensive drugs. Although our premiums are getting higher, they are not necessarily too high when compared to the benefits provided.

How much have health insurance premiums risen?

In 2011, health insurance premiums rose 9% over 2010. This was just the latest in a string of increases. In fact, this increase came on the heels of a 10% average increase in 2010. Stunningly, the cost of health insurance premiums has risen over 113% since 2001.

Increases in health insurance premiums have outpaced growth in inflation and average salary increases significantly. This means that costs are not only higher, but also more expensive as a percentage of workers’ income.

The recent increases in health insurance premiums have equally affected both family and individual plans. Over the past five years, the costs for both types of plans have increased at roughly the same rate.

There doesn’t seem to be an end in sight for the increases in health insurance premium costs. Analysts predict that these costs will continue to rise for at least the next five years and is a problem that will continue to plague Americans for the near future.

What factors are impacting increased health insurance premiums?

Many factors have led to the increase in health insurance premiums. Essentially, the amount that we pay for health insurance is calculated by a determination of the average cost of care for Americans. When our premiums rise, it is often because the cost of care has risen.

One reason for the rises in the costs of health care is the aging population. As baby boomers increasingly enter retirement and become elderly, they require more expensive medical care. The number of elderly in our population is disproportionate to younger, healthier people and this raises the average cost of health care for everyone.

The costs of health care have also increased due to advances in medical technology. Health care is becoming more sophisticated (from expensive designer drugs to advanced surgical procedures and equipment) and all these advancements come with a higher cost of care.

Further, this advanced medical technology is allowing people to live longer than ever before. While this is certainly a great benefit, it also means that these individuals will require even more expensive care.

How can increased health insurance premiums be mitigated?

While it certainly makes sense why health insurance premiums have risen, that doesn’t change the fact that these significant cost increases are difficult for many employers, families and individuals to bear. There are some solutions that can help mitigate the increased costs of health care but they are not quick fixes. Real, lasting change to the issue of rising health care costs would involve cooperation from the health care industry, insurers, employers and individuals.

One increasingly popular option for combating high health care premiums is high deductible insurance plans. These plans generally have a lower premium but require a higher out of pocket expense from the insured. The aim of these plans is to involve individuals in the choices and costs of their care by making them more financially responsible for some of the cost.

For example, having a higher deductible plan could encourage individuals to go to their primary care physician for a minor medical issue rather than the more convenient, but more expensive, urgent care center. With participants responsible for a larger percentage of out of pocket costs, they are more likely to choose both effective and cost efficient care options.

We can all also contribute to lowering health care costs by taking better care of our health and fitness. For employers, it is especially important to encourage and incentivize employees to be mindful of their health. Simple changes such as increased exercise and mobility, better nutrition, and proactive preventative care can go a long way towards reducing health care costs over an individual’s lifetime.

A large percentage of health care costs are dedicated to the treatment and management of preventable diseases like diabetes, heart problems, and other obesity-related illnesses. Positive lifestyle changes such as those listed above can be a preventative measure for many of these diseases.

While health insurance premiums have risen dramatically, they have kept pace with the increasing cost and quality of health care provided to Americans. We can all have a hand in helping to mitigate these rising costs by making ourselves educated consumers in the health care system and taking the proper lifestyle steps to prevent major health concerns in the future.

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