What Determines Health Insurance Premiums

What determines health insurance premiums you ask? Well, statistics do, of course. Health insurance, like life insurance and others, is determined by a few different factors. These factors are then put up against the history of a certain amount of people in their age group.

Let me give you an example of how this works. Let's say that you are a forty year old male and you are applying for health insurance coverage. Let's also say that you filled out all of the paperwork required and you then successfully passed your physical, until your blood test came back and it revealed that you have very high cholesterol. Well, just to make certain that the test wasn't flawed for some reason, the doctor placed you on a very strict diet for the next thirty days, after which, you would be scheduled to come in and take the test again.

These policies are determined by the statistics of other people of the same age and gender over a certain period of time. Let's say that for the past ten years only two out the one thousand forty year old males studied have had this one particular major physical health problem and that this problem costed the company a particular dollar figure in order to pay for those expenses. Well, they know that they can pretty much count on those numbers being reliable because they've done their study over ten years and the statistics keep showing similar results. Therefore, they do their math and figure the total amount of expenses that they can count on paying, along with their everyday operating costs and they then determine how much they need to charge you for your premium AND make a profit.

Does this make sense so far? Let's look at a different scenario. I don't particularly care for this one because I have a small child, however it is a good example of how this works, so please bear with me.

A few years back, I needed to get health insurance for my toddler who was about fifteen months old at the time. I sent off for the policy information and when I finally received it I was shocked at what I saw. The cost for my son's health insurance was right $200.00 per month, with a $500.00 deductible. Being a former Life And Disability agent, I thought that this was outrageous, but after I recived the explaination it made complete sense to me.

You see, children under two years of age have a much higher mortallity rate than those same kids after they reach the "terrible two's". Sudden Infant Death Syndrome is one reason, along with a host of other young child illnesses. His rates dropped all the way down around $90.00 after his second birthday, but they have no choice but to charge more at the younger age.

Hopefully, these examples have answered your questions about what determines health insurance premiums.

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