For many expats, health insurance premiums are a regular monthly expense that they hardly ever think about. Factored into their monthly budget, health insurance costs rarely come as a surprise.
Except, that is, when their insurance premiums increase. In this article, we’ll explore the factors that cause health insurance premiums to increase – and those that don’t.
In this article on health insurance premiums
What factors cause health insurance premiums to increase (and what factors do not)
Health insurance premiums increase for a variety of reasons. Understanding these factors can help you make informed decisions when selecting a health insurance plan and managing healthcare costs.
By providing a deeper understanding of how health insurance premiums are determined, we hope to help you feel confident that your insurance company is always putting you and your medical care first.
How do health insurance premiums work?
Your health insurance premiums are the amount of money that you pay every month for your health insurance cover. Every insurer will work out your premiums in a slightly different way. However, the four main factors are generally:
- your age
- your location
- your medical history
- the type of plan you choose
Usually, the younger and healthier you are, the lower your health insurance premiums will be. Your location can also affect your premiums, since healthcare costs vary depending on where you live. For example, living in a country with a high prevalence of chronic diseases may result in higher premiums.
When you pay your health insurance premiums every month, you’re essentially paying for the peace of mind that comes with knowing that you’re covered for unexpected medical expenses. However, it’s important to remember that your insurance only covers certain things, so you should always read your policy carefully to understand what’s covered and what’s not.
Does health insurance go up after a claim?
Not necessarily. Unlike other types of insurance, such as car insurance or home insurance, health insurance premiums are based on factors like age, gender and location, rather than your personal claims history.
If you undergo a significant change in your health that impacts your long-term medical needs, your health insurance company may raise your premiums, since it will cost more money to cover your medical costs.
For instance, if you have a chronic medical condition that requires frequent doctor visits or expensive treatments, this is likely to cause your premiums to go up.
That’s not always the case. Some insurers, including William Russell, use community-rated premiums. This means we set prices based on our whole membership, rather than looking at individuals. In this way, everyone gets a fair price. It also means your premiums won’t shoot up after you make a claim.
Why health insurance premiums go up
There are a number of reasons insurance companies increase health insurance premiums. However, it’s important to remember that increases only happen so your insurance company can provide you with the best possible health care.
Your insurance provider needs to perform a delicate balancing act. They must ensure they have enough money to cover claims for their members, which means they may need to raise prices to meet rising inflation, increased healthcare costs, and to recover their cash pools after claims are made. At the same time, they must remain competitive with other insurance providers by setting fair prices.
As a member of a health insurer, you can expect your prices to rise sometimes in line with wider trends in the market. But it is unusual to see sudden huge increases.
Factors that cause health insurance premiums to go up
With that said, here are some reasons why you might see health insurance premiums increase:
1/ Age-related premium increases
One of the key factors used to calculate your health insurance premiums is age.
It’s true that health insurance premiums increase as you get older. This is because the risk of developing serious health conditions or requiring regular medical care increases with age. As we get older, our bodies and immune systems naturally deteriorate, making us more prone to injury and susceptible to common illnesses, leading to more frequent and costly medical care.
As a result, insurance companies tend to charge higher premiums to older customers as a way to manage the increased risk associated with insuring older people. It’s important to note, however, that higher premiums are in no way intended to discriminate against older people.
2/ Medical inflation
One of the most significant factors that can cause health insurance premiums to increase is the overall cost of healthcare. The cost of healthcare services, including doctor visits, hospital stays, and prescription drugs, continues to rise year after year. As a result, health insurance companies may need to increase premiums to cover these costs.
The inflation rate for private healthcare is consistently higher than general inflation, and has increased dramatically since the start of the COVID-19 pandemic. The ever-increasing demand for healthcare means that hospitals and clinics can charge higher prices for the care they provide.
Over the last three years, the countries with the highest medical insurance costs were:
Gross medical cost trend rates (%)*
*Gross medical cost trend APAC 2020-2021 with a forecast for 2022, by country or region (Statista)
3/ Cancer treatment costs
Our ever-increasing life spans mean that more people are developing cancer at some point in their lives than ever before. Substantial investment in developing safer and more effective therapies has improved treatment outcomes, and new, more advanced cancer treatments are becoming more widely available.
However, these therapies are costly and can run for many years. This means that the cost of providing cancer treatment coverage in health insurance plans has also increased.
4/ NextGen drug therapies
There are many exciting developments in the field of medical technology that are improving healthcare outcomes, but these are extremely expensive.
NextGen drug therapies, also known as specialty drugs, are often expensive and require complex administration processes, such as intravenous infusion or specialised injection devices. These drugs are typically used to treat complex, chronic or rare conditions that may not respond to traditional treatments, such as cancer, autoimmune diseases and genetic disorders.
The high cost of NextGen drug therapies can significantly impact the cost of healthcare, as insurance companies must cover the cost of these medications. As a result, insurance companies may increase health insurance premiums to offset the cost of these drugs and ensure that they can continue to provide the best possible coverage for their members.
In addition to the high cost of NextGen drug therapies, the development and approval process for these drugs can also be lengthy and expensive. Pharmaceutical companies must invest significant resources into research and development, clinical trials, and obtaining regulatory approval, which can drive up the cost of these medications, causing a knock on effect when it comes to your health insurance premiums.
According to data from the Centers for Disease Control and Prevention (CDC), the most expensive chronic diseases are:
The most expensive chronic diseases*
*Findings by the CDC, based on US healthcare spending
5/ The COVID-19 pandemic
The global pandemic caused unprecedented disruption and placed an extraordinary strain on healthcare systems around the world. This has led to increases in health insurance premiums in the following ways:
- Increased medical costs – The pandemic resulted in increased medical costs due to the need for testing, treatment, and hospitalisation of COVID-19 patients. The cost of medical supplies and personal protective equipment (PPE) has also increased, and these costs are passed on to insurance companies and ultimately to consumers in the form of increased insurance premiums.
- Delayed elective procedures – Many non-emergency medical procedures were postponed during the pandemic, leading to pent-up demand for medical services. As a result, insurance companies may need to cover a higher volume of procedures in a shorter period, which can increase costs and lead to higher insurance premiums.
- Mental health services – The pandemic has also led to an increase in demand for mental health services due to the stress and anxiety caused by the pandemic. Insurance companies may need to cover more mental health services, which can be more expensive to fund.
- Telehealth – The pandemic has accelerated the adoption of telehealth services, which allow patients to receive medical care remotely. While this can be more convenient for patients, it can also be more expensive for insurance companies to cover, as they may need to pay for the technology and additional staff to provide these services.
Factors that don’t cause health insurance premiums to increase
While there are several factors that can increase the cost of health insurance premiums – as we’ve just seen – there are also a number of myths and misconceptions when it comes to understanding how insurance premiums are calculated. To help bust some of those myths, here is a list of things that should never impact your health insurance premiums:
In most cases, insurance companies are not allowed to charge different premiums based on gender as this is considered a form of discrimination. The exception may be for cover for mens- or womens-only conditions, such as maternity cover.
2/ Marital status
Insurance companies are also not allowed to charge different health insurance premiums based on marital status. This means you’ll be offered the same premium rates whether you’re single, married, divorced, or in a civil partnership.
3/ Race or ethnicity
Insurance companies cannot charge different premiums based on race or ethnicity. This is considered to be discriminatory.
4/ Employment status
Insurance companies are not allowed to charge different health insurance premiums based on whether or not a person is employed. The cost to insure you is the same no matter what you do for work, and therefore health insurance premiums should remain consistent for all. Having said that, certain types of particularly dangerous occupations may impact your ability to take out health or life insurance – for instance, if you are in the military.
5/ Genetic information
Insurance companies are prohibited from using genetic information to determine premiums or eligibility for coverage. This is because genetic information is considered to be private and personal, and should not be used to discriminate against individuals.
How health insurance premiums are calculated
In summary, health insurance premiums are calculated based on various factors that affect the cost of healthcare. These factors include:
- Age – Generally, the older a person is, the higher their risk of needing medical care. Therefore, insurance premiums increase as a policyholder ages.
- Location – where you live will also impact premiums. Areas with higher healthcare costs, or countries considered to be ‘high-risk’ will typically result in higher health insurance premiums.
- Medical history – If the policyholder has pre-existing conditions or a history of health issues before their policy starts, their premiums may be higher to account for the higher risk of needing medical care. The same goes for policyholders who engage in risky behaviours such as smoking or excessive drinking.
- Level of coverage – More comprehensive plans with higher coverage limits will result in higher insurance premiums. Additionally, some plans may have deductibles or copays, which are amounts that the policyholder will need to pay out of pocket before the insurance coverage kicks in. Plans with lower deductibles and copays will result in higher health insurance premiums.
You may also need to pay taxes and service fees on top of your premium, depending on where you live and work, and the type of plan you have purchased. This can be as high as 20% in some countries, so make sure you check this and factor it into your budget.
Insurance premium + tax + service fees = the amount you have to pay
Wherever you move, go with total peace of mind
At William Russell, we have over 30 years’ experience of helping expats find the best places in the world to move abroad and settle into their new lives overseas by providing world-class global health insurance.
Making the move to another country can be challenging. But no matter where you go, you can take one thing off your mind. William Russell offers international health insurance that can cover you for everything from minor injuries to long hospital stays, and we even offer medical evacuations to patients who require emergency life or limb-saving treatment in other countries where it’s not available locally.