Health insurance companies determine how much to charge for their services, known as the premiums, by using historical data and analysis to predict the medical expenses of a particular group of people. This group is usually a company’s employees. The fees, or premiums, that are then charged are based on the number of claims that they have paid in the past, and what they expect future claims to cost. When future claims are predicted to cost more, the premiums increase accordingly.
Consumers are demanding more medical services and care than ever before, and the high demand and state-of-the-art nature of these services are driving costs up. Increased costs are passed on to employers, who must work with the insurance companies to adjust the services that are offered and to adjust co-payments and deductibles to help the employers minimize the impact of the rising insurance premiums.
Understanding your health care plan can help you to save money on your health insurance. And example of this is choosing to buy FDA-approved generic prescriptions, since many medical plans offer a reduced co-pay for this option. Not only does the drug cost less for you because of the reduced co-pay, it also costs an average of three times less to the insurance company, allowing them to save money and to pass those savings on to you in your health plan.
Understanding these basics and how the health insurance industry operates can help you make the most of your own health care coverage as well as keep costs down for health care in general.