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The hidden factor: Deductible Leverage

 

You may never have heard of this, but it has a big impact on insurance premium rates over time, in addition to other factors.  A 10 percent increase in medical inflation can trigger a 15 percent increase in premiums to cover the effect of unchanging deductibles.
 
 
This year:
Next year:
Year after that:
Annual increase:
Medical expense
$3,000
$3,300
$3,630
10%
Your deductible
$1,000
$1,000
$1,000
0%
Insurance covers
$2,000
$2,300
$2,630
15%
 
Insurers base next year's premium on last year's payout.  You can see how that bottom line increases over time because of general and medical inflation.  If the deductible stays the same, the premium goes up even more.  The premium increase can be moderated by adjusting the deductible.

 

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