 Have you ever wondered how your health insurance company calculates the cost of your insurance? Pennsylvania Insurance Department can answer your questions. In accordance with Pennsylvania law, we review and approve the rates that insurance companies charge individuals and small businesses. We make sure you're treated fairly and that the cost of your health insurance is transparent. A health insurance company calculates the base price of an insurance plan called a rate by considering four factors, medical costs, which are a function of both how much medical services cost and how often people use those services. Medical costs account for most of the cost of health insurance, operating costs, or the amount spent on things like salaries, rent, and marketing, taxes and fees, and profit, the amount that the company keeps after it pays other costs. Once an insurance company adds these four factors to calculate the base rate of a plan, it adjusts the rate for each person who buys that plan by applying four additional factors. The amount calculated after applying these factors is the premium you're charged every month. The four factors that a company can use to vary its base rate are age, older people can be charged up to three times more than younger people, location, where you live affects your premiums due to variations in the cost of living and the level of competition between insurers and health care providers, tobacco use, insurance benefits, and insurers can charge tobacco users one and a half times more than those who aren't users. Family size. Insurers can charge more for a plan that covers a spouse and or dependence. These are the only four factors that insurers can use to adjust your premium. That means insurers can't charge you more because of your gender or how healthy you are. Where do we come in? The Insurance Department reviews rates for plans to be sold to individuals and small businesses before they are charged to you. Each spring insurance companies submit rates for the next year. We review those rates over the summer and approve final rates in the fall. Insurers then start using the approved rates on January 1 of the coming year. We consider four things when reviewing rates. First, we look at the company's medical costs in previous years and how they estimate those costs will change in the coming year. Second, we evaluate the insurer's estimate of its non-medical costs. Under federal law, insurers must spend at least 80 cents out of every premium dollar on medical costs and activities that improve health care quality. The remaining 20 cents can be used for operating expenses, like salaries, rent, marketing, and profit. If an insurance company fails to meet the 80 percent target, it must pay back the difference to enrollees. Third, we look at the insurer's financial condition to make sure it's collecting enough and premium dollars and has enough money saved to pay future medical claims. Fourth, we always think about the impact on consumers. We look at the insurer's past rate increases and consider whether the insurer could charge less and maintain a sufficiently strong financial condition. We also welcome public comment on proposed rates on our website. Considering these factors, if the proposed rates are excessive, meaning they're too high in relation to benefits, inadequate, meaning they're too low and the company might not have enough money to pay claims, or unfairly discriminatory, meaning they charge certain people more than allowed under state and federal law, the rates aren't approved, and we work with the insurer to modify their request. Remember, our job is to serve and protect you, the consumer. Make your voice heard by visiting our website to comment on proposed increases and check back for information on the final approved rates. Plan options and prices change each year, so shop around during open enrollment. After shopping on the federal health insurance marketplace at healthcare.gov, it's an easy way to compare plans and it's the only way to get federal subsidies that reduce the cost of your insurance. For more information on how to shop for or use your insurance and other helpful resources, visit our website at insurance.pa.gov.