How Are My Premiums Used?

One common question we receive from our members is how the premiums they pay are used.

The answer can be a little complicated, but we hope this will help explain it.

Members pay premiums in exchange for health insurance coverage. If you have health insurance through your job, you might see on your paycheck stub that your premium was deducted from your paycheck.

Breakdown
Here is a look at how Blue Cross Blue Shield of North Dakota premium dollars were used in 2015. For every premium dollar our members paid:

* 82.2 cents went to cover the cost of member medical care
* 7.0 cents was used for operating or administrative expenses (processing claims, technology, wellness programs for members, etc.)
* 2.6 cents was paid to the federal government in taxes and fees mandated by the Affordable Care Act
* 1.4 cents was paid to the state in premium taxes
* 6.8 cents, the remaining balance, went into reserves to provide a needed safety net to prevent future member medical claims from outpacing premiums collected from members.

Here is a look at our premium dollar breakdown from 2014 and 2013.

Keeping costs down
While premiums don’t cover the full cost of members’ health care costs, they do help to keep costs down for members. Health insurance provides members with a safety net by capping the amount of medical expenses members can be charged for covered services.

Those without health insurance are billed directly by medical facilities and are not eligible for discounts that members receive as the result of the company’s ability to negotiate savings with medical facilities. Health care costs charged by doctors and hospitals for care — not health insurance — is the primary driver of insurance premiums.

After paying premiums, members may also be responsible for out-of-pocket costs, such as copays and deductibles, when seeking medical care.

Want to learn more?
We’re happy to help. Here is more info on how health insurance works.

Ryan Schuster is an editor in the Communications department at Blue Cross Blue Shield of North Dakota.