What's the REAL Value of Being Nonprofit?
As a nonprofit health plan, it is our mission to help "people in our communities live healthier and more secure lives through high quality, affordable health care." This series is focused on the value of our health plan and how our members and communities benefit from our nonprofit status. This month, we're looking at insurance premiums and what drives them higher.
MYTH - A health plan's administrative costs, executive salaries and profits drive health insurance premiums higher.
REALITY - Excellus BCBS spent about 87 percent of its premium revenue on medical benefits in 2016, excluding the $105 million dollar federal Health Insurer Tax. Administrative costs, which include salaries and margin, represent about 13 percent of the premium dollar. Administrative costs have been reduced by about 10 percent from 2014 - 2016.
As a regional, nonprofit health insurer, Excellus BCBS's operating margin averaged just 0.3 percent of premium revenue from 2012 - 2016. Premium increases locally and across the country are largely driven by medical and pharmaceutical cost trends that include:
- Medical price inflation (driven by new technologies, etc.
- Increasing Rx prices (driven by specialty medications, etc.)
- Increasing utilization/volume (driven by an aging population, etc.)
- Medication non-adherence
- Lifestyle issues (obesity, etc.)
- Overtreatment/unnecessary care
- Government taxes and legislation
There are other factors that directly drive premium rate increases, including selection, intensity, and leveraging. View additional information about the components of a premium increase.