By Trish Pearson
Insure Your Future
Trish Pearson
I recently saw two billboards with the following message: “Insurance companies are great at…’Keeping your money.’”
Now that premium increases for next year have been announced, along with notice of Medicare Advantage insurers leaving the state, many people are asking why?
To put it in perspective, think about how everything else has increased in price: gasoline, groceries, utilities, housing, etc. Each area of the state also does not have the same cost of living. Housing prices in Fairfield County are generally higher than in New Haven or Hartford counties. A gallon of gas is more expensive on the Merritt Parkway or I-95 than at Costco.
The cost of medical care is no exception. While it is very difficult to sort out the economics of the health industry, there are a few basic issues that contribute to the current changes.
Government support was reduced and financial responsibility for drug costs shifted. In 2026, the income eligibility for tax credits on the health exchange for individual insurance returned to pre-Income Reduction Act levels. As a result, people who previously qualified for an advanced premium tax credit which reduced monthly premiums were now responsible for the entire premium. This is known as falling off the “premium cliff.”
For Medicare Part D retail prescriptions, the biggest reimbursement changes also came from the IRA and part D redesign. While it reduced the total out-of-pocket costs for prescriptions for the Medicare population, those costs were partially absorbed by the insurance companies. Those companies in turn are now passing a portion of those expenses back onto the consumer in the form of premium increases for prescription drug and Medicare Advantage plans.
The biggest driver to premium increases is often the underlying cost of medical care. Hospitals, outpatient centers and physician groups are charging more for services. Healthcare labor costs are increasing due to shortages of medical professionals and clinical staff. Insurers pass those higher expected claim costs into premiums.
Drug costs are a growing share of employer health spending. The cost for specialty drugs for cancer or autoimmune diseases can cost tens of thousands of dollars annually per patient. More people also have insurance and are using more healthcare services now that were delayed during the pandemic years. Insurers’ price premiums are based on expected future use.
Medical advances are a double-edged sword. Improved technology used to diagnose and treat illnesses are lifesaving – but at a cost. New drugs that treat serious medical conditions extend and save lives – but at a cost. The medical industry is no different than the auto industry in that the purchase price for a car in 2027 will be higher than in 2026.
Unlike a new automobile, which is usually a discretionary purchase, health insurance is a necessity. We only have one body, so we better take good care of it.
Trish Pearson is a licensed independent insurance agent and certified long term care specialist. Contact her at 203-605-4851 or trishpearson281@gmail.com.