It is that time of year when health insurers look at their health book of business and start reviewing their clients to determine whether there will be any movement in the annual premium for the following year. And let’s face it when the premium does change, everyone from employer to employee feels it, because the direction seems only ever to be one way: up.

When researching this article, I have to admit I was quite surprised by the factors that influence the pricing of health insurance. Often, we typically think it is very much claims-driven and age-related, but what I discovered is that there are quite a number of other factors that influence the change in premium. Before I go any further, I will answer the question before you ask it: no, I do not work for a health insurance provider.

Now back to the article. The question is: what factors influence the change in health insurance premiums?

Annual increases in corporate health insurance premiums stem from a combination of macroeconomic trends, plan-level adjustments, and insurer-specific practices. At the core are rising medical costs and utilisation: prices for hospital care, physician services, prescription drugs, and new technologies typically outpace general inflation, driving up claims.

At the same time, employees and employers tend to use more services each year such as mental health visits, chronic disease management, and expensive speciality drugs raising the per-member cost, which insurers pass back as higher premiums.

Plan design and coverage choices also matter significantly. Adding dependents, expanding covered services (eg, fertility treatments or enhanced mental healthcare), or increasing lifetime benefit limits all raise the expected cost per enrolled life.

Moving towards richer benefits for example, lower deductibles or co-pays, often boosts utilisation and expected payouts, thus leading to higher premiums.

The group’s demographics and risk profile play a role as well. This is the area I suspected was quite the driver of premium change, as an ageing workforce or one with more chronic conditions tends to generate higher claims, increasing the average cost per member. If the group experiences a spike in claims in a given year such as an unusual number of hospital admission, surgeries, or high-cost drug uses the insurer may raise the renewal premium to reflect the increased loss experience.

In addition, economic and regulatory pressures add another layer. General inflation and rising labour and supply-chain costs at hospitals and clinics get passed to insurers as higher reimbursement rates. New regulations or mandates covering specific drugs or enforcing mental health parity rules can increase both coverage and administrative costs, which insurers build into premium calculations.

Furthermore, renewal timing can cause a jump: if a group had a multiyear rate guarantee, the first renewal may compress several years of medical inflation into one larger hike.

And of course, a large factor that influences a change in health insurance is profit. Health insurers are in the business of making money; they are not non-profit organisations they are for-profit providers. Based upon the recent financial results published in The Royal Gazette, I would state they are a very profitable health business indeed.

The sad truth is the entire island struggles with the cost of health insurance and the increases that are passed on each year. It doesn’t matter whether you are self-employed, an employee of a group plan, a self-funded retiree, or on Futurecare — the price of health insurance is grappling, to put it politely. The fact is, there is no easy way we can combat it other than to try to negotiate with the health insurance provider directly, which I am sure has very limited success.

Now the Government might argue that universal healthcare is the answer, but if you ask the population of Bermuda their thoughts, most of us realise universal healthcare is not financially sustainable for a small population.

For anyone interested, I wrote an article published on November 30, 2024, regarding the challenges with implementing universal healthcare in small populated countries and the long-term financial impact on residents.

On the other hand — and this is only my theory — the Government’s push for full Caricom membership may be intended to create a Caricom Universal Health Plan for all member states, thereby mitigating the challenges posed by small populated countries and healthcare (again this is just my theory).

Another aspect that is very important to highlight is specific to the health insurance market in Bermuda is, we are now facing a very controlled monopoly board.

Health insurers are snapping up the railroads (doctors' offices), the waterworks (pharmacies), building hotels on all their properties (opening pharmacies) and trading deeds to dominate entire colour groups (partnering with pharmacies for exclusive primary coverage on specific drugs). I am not sure about you, but from my perspective, this screams conflict of interest and teeters on the edge of moral and ethical lines.

Let’s face it: we all completely understand why pre-retirees are evaluating where they plan to retire, because Bermuda is too expensive to live in retirement, and that is primarily driven by the cost of health insurance premiums.

Imagine you have spent your entire life in Bermuda, and finally you own your home outright, have great savings, but paying $2,400-plus per month on health insurance premiums is just too much.

While moving to another country with low-cost health insurance premiums or free healthcare might seem like the answer, free does often come at a cost with long wait times or limited services available. Again, there is still no silver bullet.

On a positive note, a trend that has been occurring in more recent years is that some employers are creating health savings plans to help employees deal with the long-term effects of rising health insurance costs. The plan works as follows: the employee contributes monthly, the employer matches the contribution, and those funds are invested (very similar to a company pension plan).

Accessibility occurs one of two ways: either when the employee retires, a full distribution is made to them in an effort to provide some meaningful financial support as they seek to find health insurance; or, when the employee leaves the company, a simple distribution is made to the departing employee, and hopefully the ex-employee sets the money aside for future healthcare use.

Although this may not be the perfect solution, I commend employers for trying to help their workforce.

At the end of the day, there is no silver bullet to combat the rising cost of health insurance, but one thing is certain: planning for the cost of health insurance during your retirement years needs to be a key component of your financial planning during your working years.

• Carla Seely is the chief operating officer at Freisenbruch Insurance Services Ltd and has 26 years of experience in international financial services, wealth management, and insurance. During her career, she has obtained several investment licences through the Canadian Securities Institute. She holds the ACSI qualification through the Chartered Institute for Securities and Investments (UK), the Qualified Associate Financial Planner (QAFP) designation through FP Canada, and the Associate in Insurance (AINS) designation through The Institutes. She also completed a Master's Degree in Business and Management through the University of Essex

• For further inquiries or suggested topics, e-mail: justaskcarla@outlook.com