Why Do Health Insurance Costs Change?

In the 2nd half of 2024 and into Q1 2025, United Healthcare is being VERY aggressive with their rates!  Some people might ask, “Matt, why didn’t you give us these great before!”  Because they did not exist before.

I had written THIS in early 2015 after the Affordable Care Act passed and expected “self funded plans” to take over the market.  They did not.  Things never materialized for Aetna & United, the leaders for self funded plans for small employers.  The risk management, even with medical underwriting, proved difficult.  A group of 15-20 employees / enrollees becomes unprofitable (or a huge loss) if one person incurs a large claim or even a series of normal claims (i.e. series of therapy sessions, ongoing physical rehab for a back issue, etc).  It was a “chicken or the egg” situation.  There needed to exist a large enough population enrolled to allow the law of large numbers to play out and that hurdle was never jumped (I’m making an educated assumption in this narrative, as well as introducing my own anecdotal experience with these kinds of plans).

Fast forwarding to more recent times, United Healthcare is taking a “shot” here.  They have REMOVED the requirement for medical questionnaires if at least 5 employees are enrolling and now are putting out very competitive rates.  They are building the head count needed to absorb losses.  You might ask, “why now?”  Insurance companies often take aggressive shots every now and then.  Maybe United Healthcare is flush with cash / market cap with the S&P 500 flirting with new all time highs every month, and net interest margins with higher interest rates have United Healthcare in a position to take a shot!  Maybe the CEO needs a boost as they have a major performance review coming up in 2025 and want to announce great news.  Who really knows, but insurance companies (and most big companies) do sometimes “take shots” and “buy business” like Chase Bank did back in 2017 with the release of their Chase Reserve product.

My guess is that United is “buying business” here a little, but it could work out for them.  It could fail miserably.  But we have a chance to join the ride and I’ll give you guidance in navigating it, that’s my job.