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Still, you may not know exactly what happens to the money you pay. Simply put, it helps cover the cost of your health care.
A major portion of your premium payments is used to pay medical care charges. The money helps cover hospital visits, doctor’s appointments, prescription medications, medical tests, physical therapy, dental care, wellness programs, gym discounts and other expenses that help keep you healthy. Even if you never use any medical or health-related services, your premiums still go to a pool of money used to pay the medical bills for all health plan members.
Along with hospital costs, your monthly premium helps cover the cost of operating doctors’ offices and clinics. Staff salaries, office rent, electricity and air conditioning are just some of the expenses premium payments go toward. It also helps doctors pay for equipment they use to diagnose and treat patients. A portion even helps doctors pay for malpractice insurance.
Money from your premium helps pay for the cost of running the hospital. For example, it pays for staff, maintenance of medical equipment, information technology and financial management. Any profit created from health insurance is used to build new hospitals and testing facilities, create care programs and purchase new equipment for testing, treating and diagnosing patients. Last but not least, hospitals also have to pay their nurses and other health care professionals.
No matter how hard we try to help every American get health care coverage, it’s a slow-going process. For those who are not insured and need care, health care bills are often paid out of pocket over long periods of time. This can be expensive for the patient, and a loss of income for the hospital.
Hospitals use some money they receive from premium payments to cover the cost of treating uninsured patients. Hospitals provide care to individuals in serious need with or without insurance.
Drug companies invest a lot of money in the research and development of new drugs. Once a drug is approved for use, it has to be produced and shipped to drug stores. It has to be advertised to medical professionals so they know it’s available for patient use.
Now that more people have health insurance, many have access to drugs they couldn’t get when they were uninsured. Drug companies use the money they receive from insurers to help pay for these activities. In return, health insurance companies work closely with drug companies to secure lower drug prices for their members. Even though a large portion of your monthly premiums goes toward drug coverage, the costs are still much lower with insurance than if you paid out of pocket.
We hope you now feel better informed about all the ways your health insurance payments serve you. If you have any questions about your health insurance, coverage or payments, please leave us a note in the comments.
Want to know more? Read "What Happens to the Rest of My Monthly Payment?"
Originally published 7/5/2016; Revised 2022
Blue Cross and Blue Shield of Montana, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company, an Independent Licensee of the Blue Cross and Blue Shield Association
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