Health insurance premiums are increasing exponentially and the resulting financial negative impact has resulted in unavoidable policy cancellations. Many patients are relegated to paying medical costs out of pocket, utilizing free clinics, or emergency rooms. Statistics indicate that premium increases have escalated more than 20% this year. However, some insured have lowered this percentage to 13% by requesting policy modifications such as higher deductibles and decreased benefits.

Why are health insurance premiums increasing at such an alarming rate? The answer lies in the increasing costs of medical care, physician's services, medication, and the calculated risk configuration that is inherent in the determination of health insurance premiums. In fact, private individual health insurance premiums have increased appreciably more than group health insurance premiums.

Medical care is expensive; this includes x-rays, laboratory tests, but especially CAT scans, MRIs, echocardiograms, even simple blood tests have literally risen to astronomical levels. One reason is technological advances, more intricate and specialized equipment is used to provide critical diagnostic information. These advances make older equipment obsolete. Although this equipment costs millions of dollars, it must be updated and replaced in order to be effective and competitive.

Cost of physician care has increased; doctors demand more financial compensation for services. Why? The cost of a medical education has escalated. Due to the risk of successful litigation, physician's liability insurance has aggrandized. This translates into amplification of physicians' expenses. The cost of living or inflation, the economic recession, and specialized education have increased the salaries of the physician's office staff, which increases office visit costs.

Additionally, the cost of medications has undergone a metamorphosis and is one of the fastest rising commodities today. The average cost of a brand name medication is over $125.00; the median cost of a generic equivalent is approximately $36.00. Some insurers have started only paying benefits for generic drugs and increasing the co-pay and deductibles on brand name drugs. However, this practice has not effectively offset the expansive cost of prescription drugs or halted increasing health insurance premiums.

Although health insurance companies evaluate certain consequential variables and theoretically spread the cost of risk over all insured, premium increases are the result of that practice. For example, a younger healthy insured may require minimal medical care, but a 55-year-old cancer patient will incur more costs. The premium calculation will reflect the estimated care costs of all insured, both ill and healthy, and average the risk factors between all policyholders. These health insurance premium rates are impacted by variables such as age, health, and the rising cost of medical and drug coverage that translate into higher health insurance premiums.