Despite simply referring to the cost you pay each month, premiums are the part of your healthcare spending where much of the math is already done for you. In turn, this is why there are constant complaints over the cost of healthcare often refer to the premium rather than the deductible or cost of services—these are the known entities in healthcare.
Last month, we discussed some of the personal factors affecting your health insurance premiums, including age, whether you’re a smoker, whether you need individual or family coverage, and the like. In this, we mentioned the concept of entering into a risk pool—a concept designed around sharing risk across populations to balance prices between younger and older individuals.
It’s a concept similar to our car insurance example, in which we noted that a no-fault state is going to have higher premiums in the same way that an unhealthy state or one considering multiple benefits essential will have higher premiums. Simply put, the more insurance is used in your population group, the higher the premium. But it’s not simply population groups driving insurance costs—much larger trends impact the larger insurance cost.
Medical Cost Trend: The Hidden Factor in Your Premium
This, according to PwC, is called Medical Cost Trend. Designed for benefits managers, the annual report highlights the macro drivers behind insurance premiums, ranging from usage to innovation. Though not something directly impacting the cost of your health insurance, measurements similar to this go into the premium calculations and affect your monthly price.
Highlighting macrotrends in healthcare costs, as well as two inflators and two deflators for 2021, here were just some of the things PwC saw impacting health insurance prices:
One of the biggest changes in 2020 that affected healthcare this year was COVID-19. From testing costs being shared by the government and the continued potential that testing could remain constant in the current healthcare landscape, this still could play a significant role in healthcare costs for months or years to come.
However, beyond the frequency of testing in both public and private health, utilization plummeted in 2020—at least in some areas. Supply was constrained—or changed—in some areas, resulting in a quarter of 2020 seeing minimal use. In turn, this reduced utilization could impact the ongoing costs, throwing a change in the pricing structure for years to come.
Inflators: Different Utilization and New Specialty Drugs
2020 changed the way that we seek out care—but it also changed the services we’re using. Knowing this, PwC found that mental health utilization skyrocketed in 2020, driven by lockdowns and distance. Pair this with continued innovation in the pharmaceutical space, and the associated costs that come from this innovation will remain a significant driver of increased costs for years to come.
Deflators: Telehealth and Reduced Networks
Just as patients changed their services sought, they also changed the way they access services. Telehealth has long been part of the solution, but without the right legislative and regulatory push, it didn’t see adoption until the pandemic. Those billion visits over a computer saved patients money, and if well-implemented, can continue to keep pushing costs downward.
Another area of downward pressure? Narrower networks. Insurers are offering shrinking the size of networks. Employers are adopting these, and it’s expected this will trickle into the individual market in coming years.
Expectations for Premiums in 2022
Finally, PwC looked at some of the things that are happening this year that could impact your premiums in 2022. These included:
- Inflator: Return to normal utilization after a year filled with delayed surgery and telehealth.
- Deflator: Patients may realize the benefits of telehealth services and continue using these services in the future.
- Unknown: Policies are still changing for return to work, requiring further analysis on how testing costs will impact cost trend.
Know Your Health Insurance: Speak with a Broker
Health insurance has a lot of moving parts—the tens of thousands of pages in the ACA mandate formulas and more that can make your eyes glaze. Luckily, if you’re looking to understand what’s best for you, a broker can help.
And that’s where Insurance Broker Hub comes in. With the help of our national network of licensed brokers, shopping for insurance doesn’t have to be complicated. Insurance Broker Hub has helped over 10,000 consumers find the coverage they need at a price they can afford.
Our free service gives you access to an independent network of national brokers who have the experience and expertise to design a plan around your needs and budget. Ready to get started? Simply request a no obligation health insurance quote here.