There’s been so much recent press about big premium hikes in health insurance plans. And I gotta say, I’m not quite sure why! I’ve assisted with 33 renewals so far this year and I haven’t seen anything like what folks are describing in the media.
Premium Cost vs. Premium Assistance
There are two factors that play into the cost of your health insurance premium. The first is the cost – what the insurance company is charging for the plan. The second is the premium assistance – the amount that the government is contributing to help you pay for your health insurance. (Cost) – (Assistance) = what you actually pay. In insurance parlance, this is your “net premium.”
While premium rates do increase each year, so does government assistance. I’ve worked with several individuals whose assistance increased by so much that their “net premium” (the amount they actually pay) went down instead of up.
Insurance companies aren’t always great about communicating this. They’ll send out letters saying things like “Next year’s premium will be $638.” Then the recipient, who was paying $1/month last year, understandably freaks out. But the letter fails to explain that the $638 is the gross premium and that the net premium is still $1.
You’ve Got Choices
In California, we’re lucky enough to have a bunch of different insurance companies working through the exchange. While every insurance company increases their rates each year, some of them increased them by a LOT and others by a little. Sticking with your insurance company might create a rate hike, but if you’re willing to consider other companies, there are probably other options that are more affordable.
You can also switch metal tiers. If you didn’t use that Silver or Gold plan much last year, Bronze might be a much more cost-effective option. It’s important to evaluate your coverage each year and make sure that last year’s choices still make sense.
I worked with one individual who was receiving important ongoing treatment from a physician who only accepted coverage through one insurance company. That insurance company hiked their rates this year – and this person chose to keep the coverage to keep working with the doctor. Unwieldy rate hikes do happen, but only in unusual circumstances.
The Take-Home Message
When you hear statistics saying that rates went up by 13%, take it with a grain of salt. The two largest insurance companies increased their rates a lot, which is what’s leading to that finding. Most folks are able to get additional premium assistance to compensate for the jump. And almost everyone has cheaper options available than the plan they chose last year.
It’s important to reevaluate your coverage annually. Don’t just wait until you get that letter saying that your rate has gone up! Let’s take a look at your options and make sure you’ve chosen the best one. I hope you’ll book an appointment with me here 🙂