12:42 PM

The cost of health insurance explained



Nearly 90% of premiums pay doctors, hospitals, pharmacies and medical claims.

With rising inflation and so much economic uncertainty, health care costs are also rising.  That’s making it more difficult for families to plan household budgets.  Since doctors, hospitals, prescriptions and other health care services account for almost 90% of your health insurance premium, higher prices also impact your premium payments.

Horizon is working to lower your out-of-pocket costs and make health care more affordable. As a not-for-profit, we exist to benefit our members and no one else—we have no stockholders or investors. And we think you deserve to know how we spend your premium payments.

So where does that money go? You might be surprised.

Physician services (31 cents). These include all fees paid to doctors for a wide range of health care services. A few of the many are annual check-ups, preventive care (mammograms, cancer screenings, blood tests, etc.), surgery and recovery care and much more.

Outpatient costs (21 cents). From in-home nursing visits to post-operative evaluations, treating bone fractures to physical therapy, these costs were incurred for care at outpatient facilities (those that don’t involve an overnight stay).

Prescription drugs (20 cents). One of the fastest rising and most debated health care expenses, controlling prescription drug costs is a challenge for everyone involved in health care as they continue to rise faster than any other part of health spending.

Inpatient costs (17 cents). Hospital stays generate a myriad of expenses, and often include charges for surgeons and other specialists, nursing and a wide range of other hospital fees. These costs can be quite high for lengthy stays due to acute emergencies or chronic illnesses.

What about other expenses?

After covering our members’ care needs, we were left with 11 cents out of every dollar collected. Here’s where we applied the money—and why.

Premium taxes, Affordable Care Act (ACA) fees and other taxes (3 cents). Horizon is a not-for-profit company, but we still pay plenty of federal and state taxes. From 2017 through 2021, we paid $2.23 billion in government fees and taxes.

Administrative services (6 cents). Like every business, large and small, we incur expenses running the company – salaries, phone and electric bills, printing costs, advertising, accounting, information technology and other operating costs connected with the routine functions needed to manage the health care of nearly 3.8 million people.

Insurance Brokers and Consultants (2 cents). Many people and businesses use a broker or consultant to help them make the right choices about their health insurance. They play an important role in making sure that business owners and their employees understand their plans and how to use them to get the care they need. Brokers are paid through commissions on the policies they sell.

What about Horizon’s profits? There aren’t any.

As a not-for-profit company, any income remaining after we’ve paid all the claims and bills goes into a reserve fund that protects our members. Horizon doesn’t have investors or stockholders so every dollar we take in either covers one of the costs listed above or goes into our reserves – think of it like a savings account. 

New Jersey, like most states, requires a minimum level of capital reserves for a health insurer to operate in the state. These reserves are there to pay claims or other expenses when the unexpected happens. Reserves enable insurers to continue paying doctors or pharmacies during a natural disaster like a hurricane or cover unexpected costs if a public health crisis like a massive health outbreak occurs. It’s one more way we give our members peace of mind. 

Working Together to Control Costs

Horizon continues to work with doctors, pharmacists, and hospitals to help rein in costs. We’re leading the effort to move from a system that paid health providers for the number of services they deliver—think tests and procedures—to one that pays them for better results, meaning better patient experience and improved health. 

We’re also working with our partners to arrest some of the core issues behind chronic health conditions that prevent our members from achieving their best health. For example, we’re investing more in programs that holistically help our members address co-occurring behavioral, substance use and medical challenges. Our behavioral health provider network has grown by more than 40 percent in the last two years, providing proven, individualized care that helps our members best meet their needs. 

Better care, lower costs, and an improved health care experience for our members. That’s Horizon’s focus.