Medical Insurance Premiums On The Rise
Have you noticed an increase in your medical health care premiums over the last few years? Medical premium costs have gone up significantly and are not likely to be going down any time soon. This is primarily because the health insurance industry makes a profit off of the premiums only if what they collect is less than what they spend on reimbursing healthcare costs to healthcare providers. With a decline in national health and increase in healthcare provider costs medical insurers are increasing premiums to ensure their profit margin is not lost.
A medical premium is the money you pay for medical coverage. Medical insurers hope to earn more money in investments than they must pay out in medical insurance claims. However, the raising costs of healthcare and the increase in people who need healthcare services are narrowing the profit margin and premiums are being increased.
I currently pay a $300-per-month medical insurance premium for a family of five. That is $3,600 per year. My family is very healthy and we have not visited a doctor for over a year. This means my medical insurer made $3,600 because it did not need to reimburse any of my family's medical expenses.
My medical insurer likely invested my monthly premium and earned a percentage from the monthly investments. The longer the money sits in the investment the more the insurer can make. Investments can rage from overnight loans to a bank to investing in real estate.
The higher the risk of payout by a particular group of people the higher the premium is likely to be. For example, police officers may pay higher premiums than teachers because police officers have a higher probability of needing medical care. This is why there are different costs for the same type of policy and why some medical insurers do not cover procedures for preexisting medical conditions.
Medical insurers invest the money they charge for premiums and sometimes may delay payment to a healthcare provider in hopes of making more money off of the interest before paying the provider. For example, suppose a healthcare provider submits a $1,000 claim to a medical insurer for the services performed to a patient. On average it may take a medical insurer a month to process the claim. This one month of processing time could earn the insurer 10%. That means that the insurer could pocket an additional $30 by stalling a reimbursement. Every month the money sits in the investment the more profit the insurer is able to make.
The problem with delaying payment is that the longer the insurer takes to pay the healthcare provider the more the patient's costs increase. In a negative cash flow situation, while the healthcare provider is waiting for reimbursement, it must also pay interest and bank fees on loans. In a positive cash flow situation, the healthcare provider is able to put investments on hold in order to cover the operational costs of doing business.
Conflicts commonly arise between medical insurers and healthcare providers. If a payment is unreasonably delayed or if the medical insurer suspects needless procedures are being done for profit, the time consuming investigative process can delay the reimbursement even longer.
To ensure a speedy reimbursement medical insurance specialists have the important task of keeping accurate patient records, submitting complete insurance claims and correctly coding the procedure provided to the each patient. Any inaccuracies in any of these areas can delay payment for several weeks.
The link between insurance premium increases and medical costs reflect each other. The only way to keep one from rising is to keep the other from rising or by cutting benefits to the consumer. Medical insurers run health maintenance organizations (HMOs) that provide healthcare facilities but are operated by the insurer. This allows the insurer to reduce operating expenses by negotiating better prices with suppliers. In most instances, people who use HMO's pay little to no money for medical procedures other than their premium. Some people prefer to use HMOs to save their monthly medical costs, unfortunately there can be several limitations common when working with an HMO partnered healthcare provider.
Healthcare has become a battle for popularity. The more popular a healthcare provider is the more money it can generate annually. Most healthcare providers are in competition with each other. They are continually trying to offer the nicest rooms, the best doctors or offer the most expansive services. All of these options are offered in hopes attracting patients. This is great for the patient because it provides options. However, these additional features can also incur additional costs that must be paid by either the medical insurer or the patient causing an increase in medical premiums or out-of-pocket expenses.