Yuriy Nikanyonok  

Determination of Prices on Health Insurance Policies

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This article might be of use for those who have little experience in health insurance or do not understand completely the essence of price determination on this kind of policies. If you are an employer considering conclusion or renewal of health insurance agreement for your employees, you’d want to know about the factors which influence the price of the policy. They are briefly reviewed below.  

First and foremost is the loss ratio of each particular insured company. This indicator demonstrates the relation between the indemnity paid under the contract by the insurance company and the total insurance premiums paid to it under the same agreement. Obviously, this indicator can be calculated only for the companies who have prior history of insurance. The higher the loss ratio is, the higher insurance rates will be most probably offered by the insurance companies. You are free to decide how honest you would like to be in this regard. However, our recommendation is either to be completely open about it with your insurer or to keep this information completely confidential. You do have a right to it after all.

Second, the number of employees insured. The bigger the number, the cheaper is the policy.

If the lion’s share of your staff resides in the area where medical services do not cost much your corporate health insurance policy will cost less.
Third, the geographic location of the company and its employees. If the lion’s share of your staff resides in the area where medical services do not cost much, this could add up to lower insurance rate for the corporate health insurance policy.

Fourth, the class of medical institutions. The level of the medical institutions cannot but affect the price as well. You can also differentiate the program overviews in accordance with the class of clinics. Normally VIP clients are offered branded hospitals, top managers are entitled to get treatment at private, but not branded, medical institutions, and rank-and-file employees are offered middle-class private clinics or public medical facilities.

Fifth, limit of dental care coverage. The bigger it is, the more you’ll have to pay. It’s as simple as that.

Sixth, limit of pharmaceuticals coverage. Its correlation with the price is the same as the dental care’s.  

Seventh, the deductible amounts. They can actually differ depending on the coverage options. For example, it can refer to the class of medical institutions. In this case you can use the services of branded clinic if you are willing to pay for certain procedures out of your own pocket. Some deductible amounts are tied to the pharmaceuticals or medical procedures’ cost. The higher the deductible amount is, the less you will have to pay for your health insurance policy.  

Eighth, bonus coverage options. The more of them are included into the policy, the more expensive the whole health insurance program will turn out to be.

Finally, what can be done to make this insurance product cheaper? In most cases adjusting factors 4-8 is sufficient. Unfortunately, normally little can be done in terms of loss ratio, number of employees insured and geographic location. 


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