Prices are rising less rapidly than they were 18 months ago across the economy, but one item on our budget where inflation is not under control is health insurance. The most recent KFF health insurance premium survey shows that the average annual premiums for single coverage are now $8,435; family coverage was averaging a cost of $23,968 in 2023. This is up 7% over 2022, and 47% higher than in 2013. Preferred provider plans cost a bit more ($8,906 and $25,228 respectively). In contrast, the inflation rate, as measured by the Consumer Price Index, has been roughly 30% between 2013 and 2023.
Does this mean that the health insurance companies are raking in excessive profits at the expense of their policyholders? The most recent report by the National Association of Insurance Commissioners (from mid-2022) lists the aggregate ‘loss ratio’ for different types of policies, which can be considered a back-of-the-envelope look at the difference between what the companies are taking in vs. what their policyholders are receiving in claims paid. For comprehensive hospital and medical coverage from 2018 to mid-2022, the loss ratio ranged from 67.8% to 77.7%. Medicare supplement policies experienced loss ratios ranging from 72.9% to 82.4%.
That does not count administrative and overhead expenses (those people who routinely deny your claims don’t come cheap), so the actual profit margins are lower than these figures might suggest. But there seems no question that the insurance industry is putting a decent amount of your premium dollars into its pockets—and it enjoys a relatively captive market that allows companies to raise rates without worrying that we’ll go bare in protest.
This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice.