This is a very important question that we are asked frequently when premiums increase. It's important to understand the concept of health insurance and also what affects your particular rates. Let us first take a look at what drives Individual and Family plan rates.
Your individual health insurance is based on your age and the zip code you live in. Zip code can swing rates but your age is really the driving factor. Average health care costs double with each decade of a person's life. Typically, you are grouped together with people in your area and a certain age band. For example, if you are 43 years of age and live in Los Angeles, you will be grouped together with people in the same general area within the 43 age range. All these individuals form their own "risk pool" which means that you share or average your medical costs and claims among the entire group. This is essentially how health insurance works...it's spreads an individual's risk among many people. If you undergo a catastrophic health condition that costs $100,000 in a single year, you do not directly feel that yourself and your individual rates do not go up in proportion to this claim. This is very different from car insurance where your premiums can go up if you submit a claim. The rates typically go up each year but if there are $100,000 people in your risk pool, your individual premiums will go up $1 as a result of the large claim. In a nutshell, you now understand the entire purpose of insurance with this one example. $100,000 can put one person into bankruptcy but it has very little effect on 100,000 people.
As for area, the medical costs of a given
area tend to be different from other regions of
the State. This is pretty reasonable as many
other economic factors vary by area such as real
estate prices and other basic living expenses.
It used to be that LA county and the larger
metropolitan areas were more expensive but rural
areas have crept up if not surpassed them as
their is a lack of competition among medical
providers in those areas. If your county only
has one hospital, there is not much incentive
for them to keep the rates competitive.
A few important notes about individual family health insurance plan rates in California.
For a young child, the newborn to age one rate is almost double the rates from age 1 to age 18. The first year of life is typically accompanied by more frequent visits and well baby check-ups which start to settle down after age 1.
Health insurance rates in California increase on the month or the 1st following your birthday when you enter a new age band. It is not like life insurance where your rates are based on the age you originally purchased the coverage on. After ACA, rate increases associated with age generally occur at open enrollment at the beginning of the year.
All of the plans have seen increases on an annual basis but the richer plans (HMO's and richer PPO plans) will likely increase at a faster clip and tend to be more expensive. Find out more information on how to gauge the benefits of high deductible health plans such as the HSA (Health Savings Accounts).
Costs associated with maternity coverage is not going to affect an individual in their 50's and 60's and to a lesser extent, people in their 40's. It will impact costs for people in their 20's and 30's if the plan covers maternity.
Otherwise, the age associated increases and zip code factors still play a part in your rates.
We hope this is a good explanation to what your rates are based on. You can find additional information on trends and the basis of health insurance rates below.
Other important concepts to help you
understand your California health insurance
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