Breakdown of a health insurance premium dollar in 2020

Compared to two years ago, a smaller portion of premiums are going toward prescription drug costs, while a larger portion is going toward in-patient care

Understanding health care costs is complicated, to say the least. There’s the amount billed for a service, the negotiated rate ultimately paid, and then how much the service actually cost the provider. And where does that money go? There are facility fees, provider fees, drug costs, administrative expenses, and so forth.

America’s Health Insurance Plans (AHIP) recently released an updated breakdown of how American’s health care premiums are allocated among the various health care services.

Related: 10 states reaping the greatest share of MLR rebates

“Every American deserves affordable, high-quality health care that provides them with real value and peace of mind,” said Matt Eyles, AHIP president and CEO. “Health insurance providers invest health care premiums in pursuit of that goal.”

Compared to two years ago, a smaller portion of premiums are going toward prescription drug costs (21.5% versus 23.3% in 2018), while a larger portion is going toward in-patient care (19% versus 16.1%). The percentage of premiums going toward net profits has increased since 2018–from 2.3% to 3%–but still makes up just a small portion of total spending.

Read more:

• Cost to create a medical bill? $99k per year per doctor
• AMA alleges insurers misusing codes to hide administrative costs
• Resolving to control drug costs: Your PBM contract really matters