How the Economy Affects Health Insurance Rates

At first glance, economics and good health may seem to have little to do with one another, but studies have shown that they are crucially intertwined. Tough economic times and rising health insurance premiums go hand in hand, as it turns out, and more and more Americans are finding themselves without a health care plan as these premiums become difficult to pay.

Employer Responsibility

Most employers shoulder about 76% of the cost of employee health benefits, but when profits are down this amount is often reduced in order to keep struggling businesses afloat. This reduction results in higher insurance premiums for the employees, effectively reducing their total wages. In some cases studies found that employees with higher co-pays and premiums actually accrued fewer total healthcare expenses than those with access to free health care. However, it is not clear whether this was because they did not need them, or because they could not afford them

Mounting Expenses for Employees

Many people can only afford health insurance because their employers pay it for; in these cases, when premiums rise, they may no longer be able to access proper health care at all. A similar situation exists for the unemployed and those working part time jobs. While a program called COBRA allows many unemployed workers to keep their health insurance if they can pay the full premium without employer aid, this is often impossible in the face of reduced income. Access to affordable healthcare is far less likely to be available to the average American during times of economic crisis.

Are Insurance Companies Affected?

An insurance policy works upon a simple premise, which is that most people are healthy most of the time. If many healthy people pay a small monthly fee to an insurance company, it will make enough money to be able to afford to pay for the expenses of the few people who “do” get sick. This system works well as long as healthy people continue to pay money into the system. Unfortunately, insurance companies also feel the strain of tough economic times, as fewer people are able to buy policies; this leads to increased premiums as the company tries to compensate for loss of profit.

A Rising Bottom Line

Ultimately, reduced access to health insurance and health care is detrimental to all parties involved. It hurts employers, who have fewer healthy workforce members, and employees, who suffer physically without access to proper care. In addition, insurance companies are forced to charge more for coverage, leading many underemployed citizens to give up paying for health insurance altogether. This impacts hospitals, which are asked to provide free services to those who cannot pay. It also increases the strain on doctors and nurses, who are more likely to be underpaid and lack access to appropriate equipment.

Health insurance rates are part of the healthcare system, which is financed primarily by the government and its citizens. When money is tight, rising health insurance rates are a bit like the canary in the mineshaft – they act as a financial barometer, reflecting the economic strain being experienced by all parties involved.