Our members often ask us what happens to health insurance premiums they pay. Here’s a quick explanation.
Blue Cross and Blue Shield of Nebraska charges premiums in exchange for providing our members with health insurance coverage. Health care costs are the primary driver of health insurance premiums. Premiums are intended to cover the full costs of members’ health care costs along with administrative expenses and taxes. In order to help keep costs down, discounts for covered medical services are negotiated on our members’ behalf. Health insurance provides a safety net by capping the amount of out-of-pocket expenses members are billed for by hospitals, clinics and doctors.
Our statistics from August 2015 showed for every premium dollar members paid:
- $0.42 covered the costs of members’ hospital bills
- $0.28 covered the costs of members’ doctor bills
- $0.15 covered members’ prescription drugs
- $0.09 were used for operating expenses including processing member claims
- $0.04 were paid to the federal government in taxes and fees mandated by the Affordable Care Act and other laws
- $0.02 were used for quality initiatives to continually enhance and improve member outcomes
If there is anything left over after paying members’ medical claims and our bills, it is kept in reserves for when the medical claim expenses are more than the premium dollars coming in – they are not distributed as profits. Last year, nothing was left over to contribute to the reserves.