How Health Insurance Is Priced and Why

  How Health Insurance Is Priced and Why

Health insurance is probably the most important insurance all of us need, since sooner or later, we or a loved one, are bound to need the services of a doctor or stay in hospital.

Without a health insurance, it is unlikely that you will find a specialist doctor or obtain treatment for illness or injury where and when needed unless you have deep pockets. This is particularly a common case with developing countries. Without a health insurance you could be turned away in a private hospital emergency room, unless it is a life-or-death situation. In short, health insurance is vital to the health and welfare of each one of us.

Health insurance does not come cheap. The main reason for this is the high cost of healthcare. A major illness or injury requiring a couple of weeks in the hospital is enough to flush out of your life savings down the drain and into the hands of doctors, hospitals, pharmacies and medical laboratories. The medical field presents a paradox concerning the cost and technological innovation. Whereas the latter is considered the source of cost saving in the remainder of the economy, medical innovation translates to increased cost. In essence, therefore, technological innovation is viewed as mixed blessing by many health insurers, in particular, sighing whenever there is an announcement of development of new medical technology.

The reason is simply that higher medical costs mean that the insurance premiums have to be adjusted upwards. The general trend of claims, of course is critical actor of health insurance pricing. But there are other underwriting criteria used by health insurance providers such as the following:

Age: The older you are the more likely you are to get sick; therefore the higher you health insurance premiums.

Number of people covered: Many people would buy family packages rather than individual policies. This means that their will be adults as well as minor children protected by the same plan. Most insurers charge based on the size of the family.

Health history: Insurance operates on statistical probabilities. If you have had a poor health history, statistically you are more likely to have a more expensive health care feature. This, in turn, means that you will pay higher premiums- that is if you get cover at all.

Occupation: The more you are likely to suffer injury or illness because of the work you do the more likely the health insurance industry will be to charge excessively for the benefits. In this respect beware health insurers who could have a tendency to stretch the concept into areas that have nothing to do with inherent danger of the work. Those who do this may be trying to avoid the likelihood of paying for treatment of certain diseases that may be contracted because of the nature of the work.

Lifestyle: In your proposal or application for health insurance, you will be asked questions about your personal habit. Your answers will have a lot to do with the cost of your premiums. If you smoke or drink to excess, you will probably pay for more for your cover. If you are known to be under great deal of stress, you are likely to be charged more for your medical cover.

The greater likelihood that your lifestyle will make you sick, the greater the likelihood that you will need medical care and thus the more expensive your health insurance will be.

These are the factors that are considered when pricing health insurance cover. Increase in premiums normally follows claims experience but the escalating costs of medical treatment play a significant role in setting this trend. You now know, so when you apply for a cover or have one do not blame the health insurers.