Why Health Insurance Premiums Are Rising — And What You Can Do About It
Did your paycheck get smaller in 2024?
If so, you might want to check your pay stub. Employees across the country had health insurance premiums spike this year. For some people, these jumps in premiums are seriously affecting their take-home pay.
This article will cover why this is happening and what you can do about it.
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Why did my health insurance premiums go up?
The premium increases of 2024 are in some ways a continuation of different things. First, your employer may have bought their health insurance plan from a broker. Brokers are paid on commission and can be incentivized to sell your employer more expensive plans.
But brokers are only one part of the issue. Insurance companies are subject to medical-loss ratios set by the Affordable Care Act (ACA). For smaller company plans, the insurance companies are allowed to use 20% of money they get from premiums on their own overhead, marketing and administrative costs. If you work for a bigger company, that changes to 15%. The rest must go to paying for or improving care. As the cost of care rises — for reasons such as a growing aging population and providers referring patients to expensive specialists — that means insurance companies make more money by raising premiums.
David Contorno, founder and CEO of E Powered Benefits, also speculates it may be because we are at a critical mass. He’s noticed that in 2024, his company has had employers come to them to solve issues with premium increases of 40%, 50% – even as high as 80%.
“This is a lot higher than it has been for the past five, maybe even eight years,” said Contorno, who has three decades of experience in the health insurance industry, including nearly 20 years as a broker. “The insurers are claiming that there was a decrease in elective procedures during COVID, and some of [the increased cost] is reflective of that suppression now that people are coming back. People are getting the procedures now because they didn’t get them a couple years ago. That’s the excuse.”
Is it legal?
It is. One protection that exists is that if your employer is large enough (50+ employees in most states, 100+ in select states with larger populations,) they must offer at least one plan that meets the federal definition of affordable.
It fits that definition if the lowest-cost plan is 8.39% of the employee’s gross W-2 earnings or less.
The 8.39%-of-your-pay standard doesn’t help as much for those who have family, like a spouse and children, on their health plan. Those premiums aren’t protected from unexpected hikes or affordability issues.
What are my options?
If you’re struggling to make the math work on your newly reduced paycheck, there are a few steps you can take to try to remedy the situation.
1.Talk With Your Company
Explaining the dire situation to those who have the power to change it could, if you’re lucky, get the wheels turning on a solution.
“Go to HR and the CFO – not just HR,” Contorno said. “We go to HR for these things constantly, but they don’t have the financial insight into the health plan. They’re just looking at the human impact. But if enough people went to the CFO, then hopefully they’d start looking at other solutions.”
This is what Contorno’s company, E Powered Benefits, tries to help with. It works with employers – like those facing affordability issues – to put together employer-sponsored health insurance plans that are still compliant, but less traditional and cost less.
2. Switch Employers
If costs don’t change with your current employer, you may consider switching. However, you may run into similar affordability issues. Employer-sponsored health insurance premium spikes are a wide-spread issue in 2024 – not one unique to your particular employer.
But shopping around for work + health insurance is still an option — just unlikely a silver bullet.
3. Medicaid May Be An Option – In Select Circumstances
Medicaid is a joint state and federal program for low-income individuals. There are multiple requirements for eligibility, including your Modified Adjusted Gross Income (MAGI) and being a U.S. citizen or certain qualified non-citizen.
Medicaid laws vary by state, and there are 10 states that have not opted into Medicaid expansion. Depending on where you live, you might be able to enroll in Medicaid rather than accepting your employer’s health insurance plan offer.
“There is a bottom floor threshold at which you would qualify for Medicaid, regardless of whether or not you were offered employer insurance,” Contorno said. “But it’s a really low multiple of the federal poverty level. The reality is that if you’re making anything more than the federal minimum wage, you probably won’t qualify for that rule.”
4. Take Advantage of Charity Care
Premiums aren’t the only way you pay for health insurance. There are co-pays, deductibles and other out-of-pocket costs throughout the year. If you have health insurance, you might be surprised to learn you could qualify for the hospital system’s financial assistance policy (FAP). The ACA requires nonprofit hospital systems to run these programs, also known as charity care. Depending on your location and family size, income limits can go well up into the six figures.
And you can use them even if you have insurance. In some cases, they can wipe your bill down to $0. If you can’t find information about your hospital system’s FAP online, call the billing department and request the information directly.
Pittsburgh-based writer Brynne Conroy is the founder of the Femme Frugality blog and the author of “The Feminist Financial Handbook.” She is a regular contributor to The Penny Hoarder.
