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Health care costs are rising. But do you know what's behind the increases? Do you know where your health insurance premium dollar goes? For each dollar you spend on health insurance premiums, about 90% – or 90¢ – pays for your care. The other 10% – or 10¢ – is used by the insurer, mostly to process claims, provide customer service and offer health and wellness programs.
Below is a breakdown of your health insurance premium dollar.
Hospitals (39¢) – About 39¢ of your premium dollar goes to hospitals. This is true even if you never need to go to the hospital. Your premiums get combined with other members' premiums. Then insurers use this money to pay claims. If hospitals charge your insurer more, it takes more of your dollars to cover those charges.
Hospitals use this money to:
Doctors (22¢) – Another chunk of your premium goes to pay doctors and other health care providers. Keep in mind, a specialist costs more than a family doctor. And, doctors in a larger city may cost more than those in smaller and rural areas.
Doctors use this money to:
Drug Costs (21¢) – U.S. drug spending is on the rise by 7.3% yearly. Many new drugs are coming on the market. Some that treat serious illnesses have big price tags2. And, more people are insured now. They can get care and drugs that they may have gone without when they were uninsured. So more people are spending more on drugs.
What goes into the cost of drugs?
Other Health Care Services (8¢) – From finger splints to wheel chairs, these costs come out of your premium, too.
This piece of the dollar also covers:
Other Expenses (10¢) – The final 10¢ of your premium dollar goes to the insurers' cost of providing coverage. Most of this covers the cost to process claims, provide customer service and offer programs to help you stay well. The remaining 2 or 3¢ is the insurers' profit margin.
Many health care costs are related to personal behavior. Unhealthy habits can result in chronic health issues, which cost our economy an estimated $1 trillion each year. Many long-term illnesses can be prevented or managed when found early. Most health insurance plans cover a range of preventive services like screenings, immunizations, and other types of care. Be sure to take advantage of these benefits.
Health care fraud is a key driver of rising health care costs. About 3% of all health care spending — or $68 billion each year — is lost to health care fraud. Here are some things you can do to help prevent health care fraud and abuse.
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