Factors That Affect Health Insurance Increases
If you’re new to purchasing health insurance in New York, you will be quick to learn that it’s a very unique & complex marketplace. Most consumers assume that the easiest route is to speak directly with a local insurance company (Oxford, Blue Cross, Aetna etc.) However after contacting 2 or 3 companies it’s quite easy to become discouraged (and in some cases angry). Rates for coverage in the Downstate NY region average well over $650 per month for single coverage (single and individual application). For a family plan, expect to pay an average of $2000 per month! Why are New Yorkers singled out? Why does NY happen to be one of the most expensive states for health insurance in the country? Several factors that are the driving force behind health care costs are Rating Structure, Mandated Coverage’s, Hospital associations, Pharmaceutical Costs & Medical technology.
Unlike other states that uses a rating system to determine rates for the individual,. Insurance companies in New York are prohibited from singling out the individual. Instead Rates are determined by using a community based rating system. Simply put, all individuals are pooled into large groups. So if you happen to be an individual that has a history of medical problems and you have used your health insurance extensively, your rate will be identical to a person that has a clean bill of health.
Along with Community Rating, State mandated benefits are adding to the overall cost of health insurance. Mandated as the name implies are benefits that the insurance companies must include in their health plans. These mandated benefits can account for up to 30% of the premium. Some of the more popular state mandated benefits are Fertility treatments, unlimited chiropractic care, mental health coverage, durable medical equipment, alcohol & substance abuse treatment. Unfortunately the individual cannot at this time chose plans that exclude mandated coverage.
Besides state mandated coverage’s & community rating, the other factors that contribute to the rising cost of health insurance are Hospitals, Pharmaceutical companies, the advancement of medical technology & an aging population.. Just like larger corporations, hospitals have been merging and technically unionizing, which gives them greater negotiating power when it comes to contracting with insurance companies. In order for a health insurance company to be a viable choice for the public, they need to have a large network of providers and hospitals. Therefore when they negotiate hospital contacts and deal with a larger hospital chain, its imperative to keep up their network.
Regarding the ever increasing costs of prescriptions, Pharmaceutical manufacturers are spending more of their budget towards research and development. This of course is in the hopes of finding a prescription drug that will merit the cost of the Research & Development for that one prescription. Though it may cost the manufacturer less than five cents to make one pill, that first pill produced most likely cost their company over 500 million before reaching market. .One method that insurance companies have adopted to control the cost of prescription drugs is to break prescriptions into tier structures. The more common is the three tier pharmacy benefit this offers the consumer the option of a lower costing generic prescription. A mid range name brand (a preferred brand name drug) & a high range name brand (a non-preferred brand name drug).
As Medical technologies continue to advance, obviously for the public good it’s imperative that hospitals and the medical community keep up with those advancements. Hospitals compete with hospitals and it’s not uncommon to hear radio advertisements promoting their success with a certain surgical procedure. When the popularity of a hospital is established with a certain procedure they in essence have greater buying power and use it when establishing contracts with insurance companies. So we now have consumers that shop for specific prescriptions & hospitals, based on broad marketing campaigns. The cost of those marketing campaigns, new prescriptions, and new medical and surgical procedures is a substantial factor that affects the rising cost of healthcare premiums.
Lastly people live longer, contributed to by those technological & pharmaceutical advancements. As the population ages, costs increase dramatically to insure an aged population. Being that New York State is community rated, the individual is not singled out. Rather the cost is applied to the overall insurance pool to which you are a member of.. If you’re interested in finding out about insurance pools, please read the article: What Health Insurance Pool can I Swim In?