Insurance Rates When You Are Healthy Versus Sick
Insurance is necessary for a number of reasons but the rates you pay will depend on different factors. Whether you are healthy or sick, your insurance rates are going to be affected. Your health status affects both your health insurance premiums and your life insurance premiums should you choose to get either type of insurance.
You may be noticing your health premiums increasing year after year. Increases can be common but you should know why there are increases so you are able to save some more money.
Reasons for Increased Premiums
Health insurance premiums and insurance rates usually go up with inflation but they can also increase out of proportion with inflation for different factors. Sophisticated technology helps in the treatment and diagnosis of health conditions while different medications can prolong lives when battling different diseases. The high price of these options raises the cost of health insurance for everyone involved. Since people are living longer, even with diseases that are considered deadly, it means that those with medical illness use more health care dollars.
What Determines Premiums?
Every year, an insurer will calculate the cost of paying healthcare expenses for coverage as well as operating costs. Your premium is the income that an insurer brings in to cover the costs. In order to calculate the cost of paying for healthcare, the insurance company develops profiles of consumers and figures out how much each profile patient type will cost. For example, a profile can consist of female children age 2 to 5. The insurance company then determines an average number of doctor visits for each child, vaccinations needed, and how many times she will need stitches.
Another profile can be for women age 50 to 55. This group will need checkups and maybe a mammogram or bone scan. This age group needs blood tests for cholesterol or diabetes. Even if one of these women is healthy, she may also be on one or more prescription medications. The insurance company will also look at the number of accidents, medical tests, surgeries, and possible medical needs for profiled patient groups.
They then use these profiles, multiply the base expense by the number of patients they expect to insure for each profile, and estimate their costs. Additional amounts for profits and expenses are then added to the total. They then do the math to find the average cost per family or patient and this is your annual premium.
What You Get from Your Premium
Depending on what you are paying for your health insurance plans and your health, you will get different results from your premiums. If you are healthy then your premium is likely to go farther then it would cost you to get health coverage over the course of the year. You may pay thousands of dollars and only need one prescription or visit. You are spending the money on premiums since you don’t want to risk footing the bill for a major accident, illness, or health event.
If you are older then there are more screening tests recommended each year and it’s possible that you could come out even. The cost you pay in premiums may be closer to the actual cost if you are paying out of pocket for doctor’s visits and tests.
If you are sick then your premiums may actually be a bargain. With chronic diseases, your costs if you are paying out of pocket could be thousands of dollars.
Lowering Cost of Premiums
When you are healthy, you have more control over the cost of your insurance, including deductibles, co-pays, and premiums. There are, however, some tips to help you save on premiums.
During the enrollment period or when you are looking for new insurance coverage after changing jobs, look at which is the best plan for you. Calculate the cost of your premiums and deductibles to see if you are able to save money with a different plan.
Be sure to look at different discounts, incentives, or wellness programs. Some insurers offer discounts for people who exercise, don't smoke, or maintain a healthy weight.
If you are really trying to save money and are healthy enough then you may want to consider catastrophic care or high deductible insurance. These plans will usually have lower premiums. You may also want to consider using a health savings account, where your employer is putting money aside for health expenses. This is a good way to make health expenses tax deducible. Even if you are employed, you may still not have enough coverage and can qualify for government run healthcare. Learn whether you are eligible for a state-run healthcare subsidy program in order to save money.
Why Insurers Deny Coverage
Insurance rates may not just be affected if you are healthy or you are sick but you my even be denied coverage if you are sick. Those with a pre-existing condition may find it nearly impossible to get the coverage they want. It’s either not affordable or not available. Insurance companies are allowed to refuse coverage based on health status in many states and there is no recourse for those seeking coverage.
- Chronic Illness and Health Status - It’s common for insurers to use the application process to help determine your health status to know how much coverage you should be offered and at what cost. For those in poor or fair health, it’s harder to obtain coverage and the poor health status usually means higher insurance rates.
- Prescription Drug Use - You may think that taking drugs that are prescribed is no big deal but actually taking these medications can make you ineligible for coverage in the individual market. For example, in California, individuals can be barred from coverage if they take any of the 8 to 20 most popular prescription medications in the country. This includes Lipitor, which is usually prescribed to help treat cholesterol.
- Age - Age discrimination is also common on the individual market. Some who is 64 years old but still healthy is going to pay more for insurance than a 24 year old. This is only true for those that can get coverage and it’s possible to be turned down for age.
- Gender - Women are more likely going to have to seek coverage on the individual market since they are less likely than men to get employer-sponsored coverage. However, your insurance rates as a woman will likely be more due to pregnancy. Pregnancy has been a reason why insurance companies charge women higher rates, even though a lot of policies don’t even cover maternity benefits.
- Occupation - It may have nothing to do with your health but insurers will use your job to decide if you are able to get health insurance. Window cleaning, lumber work, and roofing are some occupations that insurers won’t cover. Volunteer firefighters are also often denied coverage.
- Hobbies - Certain hobbies, such as skydiving or scuba diving, can mean that you are denied coverage.
- Weight and Height - For those who are considered obese, health insurance rates will cost more, if there is even insurance available. Those with a body mass index of more than 35 are usually denied coverage. Coverage can also be denied to those that are too tall, short, or skinny.
Why Is Health Insurance Expensive?
There are a number of reasons why health insurance and healthcare are so expensive.
Administrative Costs
The administrative costs of running healthcare companies can be expensive. Billing specialists are needed to determine how to bill and meet the different requirements of multiple insurers.
Drug Costs
The cost of drugs can be very expensive. While other countries are allowed to negotiate drug costs, in the U.S. that is not possible.
Defensive Medicine
Another reason that healthcare costs are so expensive is because of defensive medicine. Since doctors are afraid of getting sued they order more tests, even if they are sure of the diagnosis. Everyone will pay the bill with higher insurance premiums and out-of-pocket costs.
Expensive Treatments
Medical practitioners use a more expensive mix of treatments. Many people are treated by specialists with higher fees than a primary care doctor when the same treatments can be done on that level in other places.
Branding
Unfortunately, there isn’t a legitimate price for anything in the world of healthcare. Prices are usually made up depending on who is paying. The providers who demand high prices are the ones that people want to work with.
Going without Health Insurance
Since the tax penalty for not having health insurance has been removed at the federal level there are a number of people that go without health insurance due to high insurance rates thanks to being sick.
The risks of not having insurance are going to be finance related. Without insurance, you could face some problems.
Steep Healthcare Costs: Without insurance, you can be charged more for care than you would have if you were covered under a plan.
Hard Time Paying Expensive Medical Bills: If you do get care, you will be charged out of pocket full price and you can quickly find yourself in medical debt that is hard to get out of.
State Tax Penalties: While there is no federal penalty, there could still be state penalties depending on where you live.
Not Seeking Care: While some consequences are related to finances, not having health insurance can cause you to postpone receiving care. If you don’t put your health first then you can run the risk that any health issues you do have become worse over time.
Not Affording Your Medication: Since prescription drugs are rising in the country, many are just too expensive, especially without a health plan to help cover some of the costs.
Insurance Rate Increases for Life Insurance
Health insurance is not the only insurance that depends on whether you are healthy or sick. The price you pay for life insurance will be a reflection on the risk you pose to the insurer. The more risk you pose then the more you pay. Some of the things you need to consider are age and gender. Gender and age can help determine your life expectancy. With everything being equal, those who are younger will pay less than seniors since those who are older will have a shorter life expectancy. Females also pay less than males. T
hose who smoke are generally considered not as healthy and there is a lower life expectancy so there will be higher premiums. Your family’s history of certain diseases, such as cancer, diabetes, or cardiovascular issues, will also directly impact your ability to get lower rates but it’s only your immediate family you have to worry about and not any distant relatives.
There will be health questions when you go to apply for life insurance. One question is going to be about your body mass index and the answer to this question can disqualify you from insurance. Every company will have a specific set of weights and heights that are acceptable for each range and a chart for females and males.
Many insurers will also require a prescription check. When you sign for your application, you authorize your company to check your prescriptions. Before you get an adequate quote, the insurance agent needs to learn everything about your health, including your history with sleep apnea, diabetes, or mild anxiety. Many applicants are stopped at this part because they can forget health problems that have come up with the last 10 years. Ten years is a long time so it’s important to take your time on the application so that you don’t get denied.
Shopping for Life Insurance with Chronic Illness
When it comes to getting life insurance, if you have a pre-existing condition or a chronic illness then you can be nervous about qualifying for life insurance coverage since you have to pass a medical exam in order to afford the insurance rates. However, it may help you to know that getting life insurance with a chronic illness isn’t impossible and will depend on your specific medical history and your conditions.
When you apply for life insurance, there will be four different health classifications: Preferred Plus, Preferred, Standard Plus, and Standard. If your health history is complex then you could be placed in the Substandard category. Each company has its own set of underwriting guidelines to help decide which classification you fall into. At one carrier you can be Standard and another carrier could have you at Standard Plus. The differences in underwriting guidelines are why it’s necessary to choose the right carrier.
You can apply to more than one company but it can delay your application. Once of the best ways to apply for life insurance with chronic illness is to work with an independent broker who can help you understand the underwriting guidelines at different carriers and can help you by recommending the one most likely to give you the best insurance rate and health classification.
Once you have chosen a policy you can add endorsements and riders to personalize coverage and make it work for you while still alive. Some policies have living benefit riders for you to get some of your life insurance death benefit while still alive. There are a few different types. A rider for terminal illness gives you benefits if you have been diagnosed with a terminal illness and have less than a year to live.
A critical illness death benefit rider gives you benefits if you have one of the critical illnesses listed in the rider, such as major organ failure, stroke, or heart attack. This may be offered at an additional cost but not every company will offer these. A long-term care rider gives you benefits if you aren’t able to perform two of the six activities of daily living, either permanently or temporarily. These riders will provide benefits under a reimbursement model and pay for monthly care expenses. These riders usually need underwriting and may not be available to those with substandard health ratings.
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If you are denied life insurance because of your health or simply can’t afford the high insurance rates, there are some other options. There are some life insurance options that won’t have you take a medical exam, which makes it easier to apply if you do have a chronic condition. For example, simplified life insurance requires medical questions but there isn’t any medical exam. Guaranteed issue life insurance doesn't require any medical exam or additional medical exam. There are higher premiums but lower benefits.
Final Thoughts
When looking at insurance rates for health and life insurance, a lot of what determines your rate is going to be determined by whether you are healthy or sick. While being healthy or sick is not going to be the sole determination, it does play a big role. If you have a chronic illness, it can also have an effect on whether or not you can even qualify for health insurance on the individual market. Shopping for life insurance with a chronic illness can be hard but not impossible, as long as you are honest in your application and are prepared to pay for higher rates.