Consumers are experiencing rising insurance rates in both the public and private sectors due to obstacles like Coronavirus, a drop in the number of elective procedures, and increasing prescription drug costs. These rising rates are prompting many individuals to evaluate their existing policies or apply for new policies, altogether.
COVID-19 and Increased Testing
A large factor in these rising insurance rates is the ongoing Coronavirus pandemic. With the increased demand for expensive testing and treatments, insurance companies are spending much more than anticipated. In a report released earlier this year, Covered California’s Executive Director, Pete Lee, claimed that “plans in 2021 will price not only to cover losses they did not plan for this year but to cover anticipated costs next year.”
Due to the generally unpredictable nature of the virus, 2021 premium rates have the potential to rise by anywhere from 4 to 40 percent. Consumers and agents have already begun to see some of these increases play out, but things could easily change with the appearance of a new vaccine or a second wave later this year.
Elective Medical Procedures
Partially due to economic fallout of the Coronavirus pandemic, families and individuals are looking for ways to cut spending. One of the ways Americans are saving money is by canceling or postponing non-emergency procedures. Coupled with hospitals’ hiatus on elective surgeries earlier this year, this drop has cut nationwide medical spending enough to drastically skew insurance rate projections for years to come.
If most of the care already delayed in 2020 is pushed into 2021, it could potentially increase medical costs by 10 percent, the highest rate of medical cost inflation since 2007. With this potential rise on the horizon, insurance companies are increasing rates to make up the potential difference.
Prescription Drug Costs
Overall, prescription drug costs currently account for a fifth of all health care expenses. This rate continues to rise, resulting in widely used prescription drug therapies to cost well over an average of $50,000 annually. According to AARP, retail prices for nearly 500 prescription drugs increased at more than double the projected rate of inflation in 2020. This 5.2 percent increase directly affects future premium rates on plans that cover medications, such as private insurance or Medicare Part D.
Healthcare.gov reports that around 10 million individuals shop for new health insurance each year. With rates increasing for many major insurance providers, this number will likely be much higher as we enter the upcoming open enrollment period. For consumers, rising premium rates may seem worrisome, but it also provides the opportunity to shop for a lower rate. For brokers, this mass shopping frenzy means the opportunity to assist more clients in finding their ideal health plans.
Empower Brokerage is dedicated to helping you educate your clients on the insurance they need and staying on top of their health. Whether it’s through webinar training, one-on-one calls, seminars, or marketing plans. We want you to be successful. Give us a call if you have any questions 888-539-1633.