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The Rising Cost of Health Care

How health insurance works

Health insurance companies use historical data and analysis to predict the medical expenses for a group of individuals (usually a company's employees). The premiums are based on the amount of claims paid in the past and what future claims are expected to cost. When insurers pay out more in claims than they receive in premiums and when future services are predicted to cost more, premiums go up.

As consumers, we are demanding more medical services than ever before. And, the cost of these services is going up. These increased costs are passed on to employers in the form of increased premiums. Insurance companies work with employers to adjust services offered, as well as copayments and deductibles, to minimize the impact of rising costs.

Take time to understand your health plan — it can help save health care dollars for you and for all Americans. For example, many health plans offer a reduced copay if you choose FDA-approved generic prescription drugs, so you pay less. Because the average total cost of a generic drug is three times less than the brand name, it helps keep costs down in your health plan.

Understanding the basics of how health insurance works and how to make the most of your own health plan can help keep health care affordable for everyone.