How Are Health Insurance Rates Calculated

There are many types of insurance on the market, but none is as important as health insurance. Health insurance coverage is vital in today’s world, and living without health insurance means taking a big financial risk. One serious medical problem can lead to serious financial problems and possibly even bankruptcy. It is essential for every person to protect themselves and their health by getting the health insurance coverage they need.

Of course there are many stumbling blocks on the road to health insurance coverage, and one of the most significant is the cost of the premiums. The premiums for health insurance can be quite high, and many young and poorly paid workers simply find that they are unable to afford these premiums. Fortunately there are some steps those can take to find affordable coverage, and it all starts with a good understanding of how insurance companies determine their premiums in the first place.

Understanding the factors that go into calculating health insurance rates is important for a number of reasons, not the least of which is that it helps people of all ages find the best coverage at the best price. For instance, insurance companies will take the health habits of new applicants into account, so non-smokers can enjoy significantly lower health insurance premiums than those who still light up every day.

The type of health insurance will also make a big difference when it comes to premiums. Group rates can be significantly lower than individual rates, so it pays to seek out group coverage wherever and whenever possible. Full time and part time workers may have access to employer sponsored health insurance, and this type of coverage is often the most affordable. Those who are retired, unemployed or unable to get coverage through work may still be able to quality for group health insurance through trade organizations, alumni associations, professional organization, small business groups and the like. It definitely pays to seek out these types of organizations to save money on health insurance. Group health insurance allows insurance companies to spread the risk, and that results in lower premium levels for everyone in the risk pool.

Even if group health insurance coverage is not available it may still be possible to save money on the premiums. The market for individual health insurance policies has been growing, and this growth has been fueling the type of competition that should drive prices down. Unlike group health insurance, where the risk is spread out over hundreds or thousands of people, individual health insurance policies are priced according to the health risks of the individual. That means that those who smoke or engage in other high risk health behaviors can expect to pay a great deal more than their non-smoking counterparts. It also means that those who work in particularly dangerous jobs like mining or construction work may be asked to pay more.

One of the best ways to save money on health insurance is to look for a high deductible policy that is combined with a health savings account. Health insurance companies can afford to price these policies more affordably since part of the risk is borne by the insured. This type of insurance coverage also encourages individuals to shop around for the best deal on the medical services they need, helping to keep premiums lower and more affordable for everyone.