We are often asked why health insurance quotes can differ so much when comparing the market.  This is a difficult question to answer as there are many different reasons for this and the rating structure of each medical insurance plan is dependent on several factors; however, in this article, we will try to give you a few reasons and background.

The majority of health insurance companies will set their overall quotes based on previous years' claims experience and combined loss ratio.  What this mean is that they will look at the total amount of costs associated with a specific health insurance plan and figure out what premium they would have needed to cover those costs while having a margin of profit.

The most significant proportion of cost will be associated with the medical claims payments which can differ for each company based upon what they cover in their policy and who they generally insure.  As an example, an insurer with lots of cover is given to an aging client base that has accumulated medical conditions; their claim frequency will probably be higher along with their overall costs.  Another major area that will affect the total claims value is whether or not the health insurance company is able to implement effective cost containment techniques through discounting medical costs, recoveries, and controlling the claims network.

Over and above will be the administrative costs to health insurance; these would include the administration of both selling policies and also adjudicating claims.  Again, the difference between insurers can be quite large.  In many cases, health insurance companies will pay out a commission to an insurance broker or an insurance agent.  Typically this commission rate can be around 20% of the overall cost of the insurance policy.

Online aggregators, such as NowCompare have helped insurance companies reduce many of the administration costs, in addition, they have created an environment where health insurers need to be more competitive as they compare a wider variety of providers which drives down the overall cost of health insurance.