How Your Premium Dollar is Spent

Our members often ask us what happens to health insurance premiums they pay. Here’s a quick explanation.

Blue Cross and Blue Shield of Nebraska charges premiums in exchange for providing our members with health insurance coverage. Health care costs are the primary driver of health insurance premiums. Premiums are intended to cover the full costs of members’ health care costs along with administrative expenses and taxes. In order to help keep costs down, discounts for covered medical services are negotiated on our members’ behalf. Health insurance provides a safety net by capping the amount of out-of-pocket expenses members are billed for by hospitals, clinics and doctors.

Our statistics from August 2015 showed for every premium dollar members paid:

  • $0.42 covered the costs of members’ hospital bills
  • $0.28 covered the costs of members’ doctor bills
  • $0.15 covered members’ prescription drugs
  • $0.09 were used for operating expenses including processing member claims
  • $0.04 were paid to the federal government in taxes and fees mandated by the Affordable Care Act and other laws
  • $0.02 were used for quality initiatives to continually enhance and improve member outcomes

If there is anything left over after paying members’ medical claims and our bills, it is kept in reserves for when the medical claim expenses are more than the premium dollars coming in - they are not distributed as profits. Last year, nothing was left over to contribute to the reserves.



The percentage of the bill you pay after your deductible has been met.


A fixed amount you pay when you get a covered health service.

Tiered benefit plan

A health care plan featuring multiple levels of benefits based on the network status of a particular provider. 


The annual amount you pay for covered health services before your insurance begins to pay.

emergency care services

Any covered services received in a hospital emergency room setting.


Includes behavioral health treatment, counseling, and psychotherapy

in-network provider

A provider contracted by your insurance company to accept an agreed upon payment for covered services. 

OUT-OF-network provider

A term for providers that aren’t contracting with your insurance company. (Your out-of-pocket costs will tend to be more expensive if you go to an out-of-network provider.)


Your expenses for medical care that aren’t reimbursed by insurance, including deductibles, coinsurance and co-payments.


If you can afford health insurance, but choose not to buy it, you must have a health coverage exemption or pay a tax penalty on your federal income tax return.


The amount you pay to your health insurance company each month. 

Preventive services

Health care services that focus on the prevention of disease and health maintenance.


Services and devices to help you recover if you are injured or have surgery. This includes physical, occupational and speech therapy.

special enrollment period

The time after the Open Enrollment Period when you can still purchase health insurance only if you have a qualifying life event (losing other health coverage, having a baby, getting married, moving).


A physician who has a majority of his or her practice in fields other than internal or general medicine, obstetrics/gynecology, pediatrics or family practice.