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Your Health

Health insurance rates and premiums demystified

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No matter what you call them, health care premiums, rates, “bills,” are made up of the same things. Like many other critical services, health care costs are based primarily on how much the service costs and how much people use it. But, like anything as complicated as health care, there’s more to the story.

Rates submitted by health plans, and how those rates impact the premiums people pay, will receive significant attention. To fully understand why premiums may go up or down in 2017, consider the following factors:

Rates reflect medical costs: Medical costs make up most of the costs that go into the premiums people pay. By law, health plans must spend at least 80 cents out of every $1 of premiums on medical costs. Medical costs are higher in some places than others. Costs are higher when doctors and hospitals charge more, or when people go to the doctor more often, have more tests or fill more prescriptions. Medical costs also go up when drug prices go up (prescription drug prices jumped by more than 10 percent in 2015 alone) and often when new treatments are found.

On average, the people in plans on the public health insurance Marketplace or Exchange have been older, sicker and use more health care than people in other plans. This has been especially true for people who don’t join a plan at the start of the year, but wait and join later. This is one reason Exchange plans can cost more than plans offered through employers.

For all plans, medical costs continue to increase faster than the general rate of inflation and wage growth, and continue to be the driving force behind rate increases.

Risk pool and changes to government programs: The Affordable Care Act (ACA) included financial protections to maintain a stable marketplace and affordable premiums. However, two of the three programs that provided this financial protection now are set to end in 2016. When these programs go away, premiums need to rise even more.

So how do we make premiums more affordable? At Aetna, we’re working in many ways to help hold down our members’ costs. We’re working in new ways with many doctors, hospitals and health care systems so they get paid for the quality of care, not the quantity of services. We’re reaching out to members earlier to address potential health issues, so they can enjoy more healthy days. We’re emphasizing preventive care and cost-effective treatment locations in our benefit plans. And we’re giving members better online tools to understand their plans, find doctors and hospitals and estimate how much care will cost them. We’re even creating new kinds of health plans, such as our Leap plans that help remove barrier to care for people with chronic conditions. All of these things help hold down costs for people.

That’s not all. You can start by reading what Aetna is doing to build a better health system.