Don’t be mislead by claims that competition among insurance companies is the answer to rising premiums. That’s a conservative fantasy.
First, the law requires that small plans and individual insurance pay at least 75% of premium in claims and directly related services. For larger plans 80%. But that’s not even the real story. Less than 10% of total premium (more like 5-7%) is subject to competition. The rest is claims, required administration, state taxes and claim reserves.
So, if your premium is $100, $7.00 is up for debate, but the $7.00 will not go away totally no matter what.
Wait, someone will say. Why did some insurance companies have to return excess premium under the 80\20% rule? Well, because premiums are set more than a year in advance of when all claims are known. That means that within any premium cycle it’s quite possible that premiums may be set too high or too low. But in the end the overwhelming portion of premiums are spent on health care.
Insurers may compete on plan design or provider networks, but in that case you are not getting the same product and your premiums are not being affected by competition, but by the level of your out-of-pocket costs and your ability to select doctors and hospitals. You can always trade premiums for less coverage.