The top 10 factors that affect a company’s health insurance rates

Health insurance is a significant expense for businesses.  At SolV, we work with our clients to help them understand the factors that influence these rates so they can manage costs more effectively. Over the past decade, several changes have impacted these factors, making it essential for businesses to stay informed.

1. Employee Demographics

The age, gender, and overall health of a company’s workforce play a crucial role in determining health insurance premiums. Age, gender and health status have big impacts. Our country’s workforce is getting older and the recent pandemic has brought long-term health concerns into sharper focus.

2. Industry Type

The nature of a company’s business can significantly impact health insurance rates. Technological advancements and improved safety protocols in high-risk industries have slightly mitigated some healthcare costs, but the inherent risks in sectors like construction and manufacturing still lead to higher premiums.

3. Location

Where a company operates can affect health insurance rates due to regional differences in healthcare costs. Over the past decade, healthcare costs have risen unevenly across different regions. Urban areas typically face higher premiums due to more expensive healthcare services compared to rural areas.

4. Plan Design

The specifics of the health insurance plan itself—such as coverage options, deductibles, copayments, and out-of-pocket maximums—affect the cost. There has been a trend towards high-deductible health plans (HDHPs) paired with Health Savings Accounts (HSAs), as companies seek to manage rising costs. This shift can lower premiums but increases out-of-pocket expenses for employees.

5. Claims History

A company’s previous claims history can impact future rates. The rising cost of chronic conditions and specialty drugs has driven up claims costs, influencing future premiums.

6. Group Size

Larger groups still benefit from lower premiums due to risk spreading. However, small businesses have increasingly banded together to form associations or cooperatives to gain better rates. Ask your SolV consultant if this is an option your company would like to consider.

7. Wellness Programs

Companies that invest in wellness programs may see lower health insurance rates. There has been significant growth in corporate wellness programs, focusing on preventive care, mental health, and lifestyle changes, contributing to healthier workforces and potentially lower premiums.

8. Regulatory Environment

The Affordable Care Act (ACA) introduced substantial changes in 2010, including essential health benefits and coverage mandates. Over the past decade, regulatory adjustments and debates over healthcare reform have continued to impact insurance markets.

9. Insurance Carrier

Different insurance carriers offer various rates based on their pricing strategies, risk assessments, and administrative costs. Increased competition among insurers and the rise of alternative insurance models, like self-funded plans, have provided businesses with more options and bargaining power. SolV often supports the use of self-funded plans and has seen great success in using them to reduce costs for clients.

10. Economic Factors

Economic instability, like the 2008 recession and the economic impacts of the COVID-19 pandemic, has driven fluctuations in healthcare costs and, consequently, insurance premiums.

Understanding the myriad factors that influence health insurance rates allows businesses to make informed decisions when selecting health plans. At SolV, we work with our clients to look at the factors and design plans that benefit employers and employees.