Life Insurance Rates Continue to Spike in the U.S.
A recent survey conducted by the US Census Bureau found that the number of people without private or government health or life insurance decreased in number every year in the last four years. Economic trends, demographic make-up, and health care policies influence the rate of health insurance coverage in the United States.
Due to the implementation of the provisions of the Patient Protection and Affordable Care Act in 2014, more Americans are getting insured, so as not to get penalized. This gave health insurance companies the chance to raise premiums. A higher demand for health insurance means a higher demand for services, prescription medication, and medical technology which all naturally add up to higher rates. However, increasing demand is second only to a more alarming reason for this trend: the rising costs of health care.
A Trillion-Dollar Industry
The Balance reports that US health care costs reached $3.2 trillion in 2015, making up 17.8% of the country’s gross domestic product. To put things into perspective, it was only equal to 5% in 1960. Aside from policy changes, a study published on JAMA Network noted that there is a linear relationship between health care spending and these three factors: service charge and intensity of treatment; population growth; and aging.
The Main Drivers
The country operates on private and government assisted health care. In comparison, most of the world adopted a universal health care system where the government pays for most or all of the medical bills. One advantage the U.S. has over other countries is that Americans can get immediate attention. Medicare and other such policies pushed Americans to rely on hospital care so much so that 1 in 5 adults pay an annual visit to the emergency room. A CDC survey showed that 79.7% of adults who do so, both insured and uninsured, felt like they had no choice but to go to the hospital because there wasn’t any other place they could go for medical attention despite the high service charges.
This problem can also be traced back to changing lifestyles. It’s a domino effect from poor eating habits, lack of exercise, and vices; to obesity; to an epidemic of health complications that are getting more and more expensive to treat such as heart diseases and cancer. Advancement in technological equipment and treatment for chronic illnesses such as diabetes come at staggering prices. Diabetes alone has an annual budget of $64 billion. Half of the nation’s population is estimated to be suffering from a chronic disease, the treatment of which consume 85% of the total health care budget while the sickest 5% are associated with half of the total cost.
Demographic composition is also one of the main drivers of the increase in health care costs. Health IQ explains that age is the number one factor that underwriters take into account when coming up with insurance rates because as the population gets older and bigger, medical bills get more expensive. The population growth rate accounted for an additional $269.5 billion while the aging population accounted for a $135.7 billion increase in the budget.
Baby boomers who are now well into their 60s and 70s are estimated to manage at least one chronic condition or disability. This means that in order to keep up with the demand, pharmaceutical companies will have to create more output; private facilities will have to hire more personnel for palliative and hospice care; and hospitals will have to accommodate the needs of older and sicker patients. Mutual Fund Reform previously quoted an AARP study that this age group would suffer a 22% increase in their yearly premium. That is why the number one complaint about life insurance is the annual premium hike, especially to people in the third quarter of their lives.
Life Insurance: A Necessity
Because of the upwards trend of health care spending, life insurance has proven to be a necessity for Americans. A single hospitalization can leave a serious dent on one’s finances and may even lead to a lifetime of debt. Up to 1 million adults declared bankruptcy due to the rising costs of medical bills in 2015 and 40% of the American population accumulated debt due to medical care. Being insured lowers the risk of debt because of the assistance one could get in the event of a medical emergency.
Access to preventive, primary, and follow-up care are additional reasons for the dependency on life insurance. As part of ACA’s provisions, preventive services such as regular check-ups, vaccinations against common diseases, and screenings are covered by health care plans. Catching illnesses at an early stage means it will be easier to treat and will decrease costs dramatically in the long run. If and when accidents or medical emergencies do happen, rehabilitation and recovery are also more accessible which would be very difficult to obtain if one does not have life insurance.