Stop Overpaying, Learn How To Handle Your Health Insurance Renewal

November 27, 2012

It’s that time of year again, your health insurance is up for renewal. Another year, another increase.

You could barely afford what you were paying last year, how can you possibly handle paying another dollar more?

If your insurance agent knows what he’s doing, he should be contacting you around this time to reevaluate your health insurance situation. It’s very important that you take the time each year to reconfirm the best health insurance policy for you.

The average annual single premium of $5,615 in 2012 is 3% higher than the average annual premium of $5,429 in 2011. The average annual family premium of $15,745 in 2012 is 4% higher than the average annual premium of $15,073 in 2011.

In comparison, the $15,745 average annual family premium in 2012 is 30% higher than the average family premium in 2007 and 97% higher than the average family premium in 2002, all according to the Kaiser Family Foundation.

Those are just national averages. I have clients who have received increases around or slightly above the national averages to as high as 25-28%.That translates to hundreds of dollars added to your monthly budget. Where is that money going to come from? Is there anything you can do to control these increase?

Let’s take a look at what causes your yearly increases and what you can do to limit the damage.

Why Does It Cost More?

It’s a common misconception that health insurance companies charge arbitrarily high premiums for no apparent reason. The truth is, health insurance rates are largely reactive to the increasing cost of medical care and the group (or risk pool) of people you are insured with. It has very little to do with your year to year personal use. That means, the next time you hesitate to pull out your insurance card for fear of what it will do to your renewal, don’t.

Health care spending has exceeded economic growth in every recent decade between 1.1 and 3 percentage points, again according to the Kaiser Family Foundation.

This means you could turn 60 every year and it still wouldn’t have as big of an impact on your renewal as the overall cost and usage of the population as a whole.

What Can You Do?

This question is one that will have a completely different answer in 13 short months, after health care reform takes full form starting in 2014. Right now, depending on your current medical history, you will have two options available to combat your increase. Your first and easiest approach, is to consider switching to a less expensive plan offered by your current insurance company. This would mean increasing your deductible, dropping copays or possibly both. This option will be available to you regardless of your medical history.

If you have not had any major changes in your health since you initially applied for the policy, you could consider switching insurance companies. This option, while more time consuming, has the potential to provide you with the greatest amount of savings. You will be require to complete and submit an application with the new company. The application will need to be approved again by the company’s underwriting department. This leaves you open to the possibility, after underwriting is complete, that the new company will no longer be the most affordable.

Starting in 2014 you will be able to jump from company to company regardless of medical history when the Patient Protection and Affordable Care Act outlaws medical underwriting.

The Bottom Line

You, with the help of an agent, should look at your health insurance every year when you get your renewal. Take the time to survey the landscape again and confirm the best price and policy for your needs. If you let your health insurance sit on a shelf, untouched for years at a time, you will be guaranteed to overpay pay for that policy.

Have you saved money on your health insurance by performing some renewal magic? If so, how did you pocket the extra cash?