What do health insurance premiums typically rely upon when calculating costs?

Health insurance premiums are largely influenced by claims history because it provides insurers with valuable data on the past utilization of healthcare services by policyholders. A history of frequent or expensive claims can lead insurers to anticipate higher future costs, prompting them to adjust premiums accordingly. By examining claims history, insurers can assess risk more accurately, which in turn allows them to set premiums that are commensurate with the expected costs of providing healthcare coverage.

While other factors, such as market trends, agent sales performance, and policyholder age, can also impact premium calculations, claims history is particularly central to determining the financial viability of an insurance product. For example, market trends can influence overall pricing strategies or the introduction of new plans, but ultimately, the historical data on claims is what directly informs the risk assessment and pricing of insurance policies.