The more claims you submit on your medical insurance, the higher your rate will become. Is that true here in Ohio? Well, not really. Whether you have an incredibly healthy year or just one of those years when you and other family members caught the flu six times, it will not make a significant difference in your healthcare premium. The price you pay is determined by your age, where you live, the type of plan, the carrier, your smoking status, and the amount of your federal subsidy (if applicable).

I realize many Ohioans may not be aware of this. You’re probably used to your auto insurance tripling after three or four accidents in the last three years. Or perhaps your homeowner’s policy was canceled after two roof claims and a hailstorm that ruined your shed. But healthcare is different now, compared to prior when Marketplace options were not available.

Fewer Claims Probably Means You Have No Major Medical Conditions

Of course you want to have very few claims each year since the result is that you and other family members were healthy. And presumably, other than your premium, very little copays, deductibles or coinsurance were paid. It also means that if you had an active Ohio Health Savings Account (HSA), more of your contributions stayed in your account, instead of being disbursed for qualified expenses. The unused funds can continue to accumulate and be utilized in the future for any family member listed on the policy.

However, to the surprise of many Buckeye State residents, generally, your medical insurance rate does not necessarily increase based on the volume of claims you submit. For example, if during the calendar year, you have numerous surgeries, along with many prescriptions and specialist office visits that total more than $100,000, your insurer is not going to attempt to “recoup their losses” by doubling or tripling your rate. Of course, if a significant number of individuals and families submit catastrophic medical claims with the same carrier, prices will be impacted.

Why Do Rates Increase?

Health insurance rates do increase just about every year. But the real cause of your premium going up may not be you. Here’s how it works: When you originally bought your medical insurance plan, you were “clumped” together with similar persons that purchased that same type of policy at the same time. Thus, if you purchased your coverage in March of 2016, you are unlikely to be placed in the same group of persons that bought their policy in June of 2013.

Very extensive statistics are kept on the block of business for your specific plan. Over time, some policyholders will cancel, others will renew, and some will add or subtract dependents. And of course, there will be families that have very few claims and others with huge claims each year. The process of submitting a health insurance claim is typically the same, regardless of the dollar amount involved.

Typically, those insureds in very good or excellent health will tend to shop around for better rates within a few years and many will cancel their coverage and start a policy with a different company. For example, a person may purchase a policy with Humana. And after three years of rate increases, they buy a similar plan from Medical Mutual and reduce their premium by 20%. Does this sound familiar? That’s why it pays to shop every 3-5 years (although there are other considerations).

Let’s take this a step further. Let’s say you have a block of 10,000 males in their mid-40s that bought the same type of Ohio medical insurance policy in a given year. Five years later, 2,000 of the healthiest policyholders switch to a different company to get a better rate. Now, you have a block of business of 8,000 persons and the percentage of claims paid per premium has jumped. So guess what else must jump? That’s right…the rate.

And so eventually, you may have a block of business that consists of even more unhealthy persons submitting multiple claims and far fewer extremely healthy people submitting very few claims. If you’re uninsurable, you may be stuck. If you are reasonably healthy, you can find an alternative.

So…although your own claim history won’t alter rates, collectively, many policyholders can.    Should you now shop for new health care coverage every year? Every six months? The answer is no. But if you notice that your premiums are constantly increasing by larger amounts each year, then contact us and we’ll review your current policy and determine if there are better options for you.