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It’s a question we hear a lot this time of year. A customer who is healthy and rarely if ever goes to the doctor is confused – and often upset – that their premium increased.

Why does this happen?

It has to do with the way insurance rates are determined. You might be surprised to learn that your premium is affected by the care other people receive – that’s the way health insurance works. The basic concept of health insurance is pretty simple: you take a large pool of customers (some healthy; others not so healthy) and they all contribute money by paying their premium. When someone gets sick or hurt, their care is paid for with the money contributed by everyone in the pool. People in the pool might pay for more care than they actually receive one year, but pay for significantly less care than they receive a few years later. That’s what we mean when we talk about sharing risk.

Rates Are Determined by the Entire Pool

When we set rates, we’re looking at all the health care used by the entire pool – not just how much one person or family used that year. If the pool as a whole used a lot of health care services, premiums for everyone in that pool will increase. That’s why you might see an increase even if you never went to the doctor last year. On the flip side, it also means that when you have a “bad” health care year – like an accident, major surgery or serious illness – your premium will not increase just because you used your insurance a lot. In fact, we are not permitted to increase an individual’s premium based on the care he or she received. This is one way that health insurance is very different from home or auto insurance.

If you’re on an Individual plan, you might also see an increase if you have a birthday that puts you into a new age band. Individual ACA customers may see a bigger increase when they turn 21, and then a gradual increase each year as they age. Non-ACA individual customers generally see a bigger increase when they turn 26, 30, 35 or 40. That’s because they are joining a pool of people who typically use more care.

More Than 85 Cents of Every Dollar Our Customers Pay In Premiums Go to Pay for Their Medical Care

Our customers’ health insurance premiums are driven by the cost and quantity of services the people in their pool receive. In fact, more than 85 cents of every dollar our customers pay in premium goes directly to pay for customers’ medical care. That’s why we work so hard to rein in the underlying cost of health care. Ultimately, working to ensure that our customers get the best, most effective care at the lowest price is the only way to slow the rise of health insurance premiums.

Questions?

If you have specific questions about your plan, we always recommend reaching out to customer service. They’re happy to walk you through. They can be reached via the number on the back of your card, or via the numbers on our contact page here.

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Brian Tajlili

About Brian Tajlili

Brian Tajlili is the Director of Actuarial and Pricing Services for Blue Cross Blue Shield of North Carolina, leading rate development for the Individual Under 65 and Small Group markets. Brian has been involved with various projects involving the Affordable Care Act since it was passed and is passionate about how his work as an actuary impacts North Carolinians. Brian is a Fellow of the Society of Actuaries and Member of the American Academy of Actuaries, and outside of work is actively involved in the Raleigh-Durham area’s running community.