As a long time Colorado Springs small business health insurance broker, I am often asked “why do the rates for Colorado group medical plans keep increasing?”
There are three factors that will contribute to rate increases for Colorado health medical plans.
Rates for Group Health Medical Plans Increase as You Age
The rates for medical plans are based primarily based on age. As you age, the rates for your health insurance medical plans increase.
Why is age a driving factor of group health insurance costs? The reason is older Colorado residents use health insurance more than younger folks. As we age, we may find that we have a greater need for medicines and more frequent monitoring of medical conditions.
If we are using the health care system to watch and treat medical conditions, there is a cost that is involved for care. So if we look at the annual cost of care bill for a 60-year-old as opposed to a 25-year-old, on average, there will be a pretty large difference in the cost of care.
So let’s say you have a medical plan in force for a whole year. During that year you never used the plan at all. At the end of the year, you will still have a minor increase based on your age.
As a group health insurance broker and Affordable Care Act specialist, I see this underlying aging dynamic present in both group and individual medical plans in the Colorado Springs and Denver areas.
Health Care Cost Inflation
The second dynamic the affects the cost of Colorado health insurance medical plans is inflation. As the cost of delivering health care increases, it will show up your health insurance premium prices.
Innovations in health diagnosis and treatment are not free. The cost of healthcare research and development gets passed on in your health insurance premiums.
All of us in Colorado will have our health care premiums adjusted annually whether we are under individual or group health insurance plans.
The health insurance providers that service Colorado Springs and Denver metro areas must file their health insurance rates with the Colorado State Insurance Commissioner annually.
These rates will include the new age band rates adjusted for the insurers’ take on inflation.
The health insurance provider networks do not adjust rates on a monthly basis, rather the providers adjust their health insurance plan rates on an annual basis. Since the proper pricing of health insurance premiums means the difference between making a profit or incurring a loss, annual premium adjustments play a pivotal role.
If a group medical plan does not earn enough premium to cover medical costs, the health insurance provider will lose money. If the providers are not solvent, the insurance commissioner will not allow the health insurance providers to continue marketing their plan. So pricing inflation expectations into health plan premiums are critical for health plan success.
Pooling of Small Business Health Insurance Medical Plans
Finally, the cost of the health care expenses for your group for the year is factored into your health insurance rates.
All Colorado health insurers monitor the level of claims that are incurred in their book of business. They are monitoring the loss ratio. Health Insurers monitor the claims levels of their group and individual pools of business.
When they have many group health insurance policies issued during the year, all the policies are pooled together to monitor the claims of the whole pool. In the group health insurance market, groups that have 100 or more employees, are monitored for the claims of the specific group and small groups are combined into pools.
At the anniversary of the group or the individual plan, the health insurance company will compute the losses that are incurred by the individual or group pool of business. If the group health insurance pool has been profitable, the likelihood of having an additional rate increase to cover losses for the pool is low. If the pool has had a high loss ratio, an additional increment in the renewal rate is likely.
So whether you purchase an individual plan on your own or are covered by an employer group plan, you will experience some level of change in your insurance premiums even if you do not use your health plan. Your age, inflation expectations, and your health plans’ loss ratio will determine the level of increase.
The New Year is a Good Time to Shop Group Health Insurance Plans
Are you a Colorado Springs or Denver area business owner that is in the market for a new group health insurance plan. If yes, and you want to work with a leading Colorado group health insurance broker, then please give us a call.
We have extensive experience and knowledge about the 2019 Colorado business group health insurance plans. We can help you compare group health insurance for a small business that is affordable and your employees will love.
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Do you have more questions about group medical plans for small businesses in Colorado? Preferred Insurance is a group health insurance broker which means they represent dozens of Colorado health insurance carriers. We service what we sell which means we will be there to help your employees with their health insurance needs.
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