Premiums are an essential part of every health insurance plan. Whether you enroll through a private insurance company or the marketplace, you will need to consider the premium cost before deciding on a plan. Understanding the components of health insurance premiums can help you make the best choice for your financial needs, and most importantly, your health.

The Basics

Your health insurance premium is the amount you are obligated to pay each month for your health insurance. This is a consistent amount each month that does not change if you go to the doctor or not. You could go an entire year without receiving any type of healthcare, but you’ll still be entitled to this amount. If you receive health insurance through your employer, your premium will be taken care of in your payroll deductions each month. This does not include other healthcare costs like copayments, deductibles, and coinsurance, which can all vary depending on the circumstance of your doctor or hospital visit. According to Healthcare.gov, premium tax credits might be available to Marketplace health plan recipients that need assistance paying for healthcare costs.

What is the average for a premium?

The actual cost of health insurance can vary for all kinds of reasons. However, a 2020 study by eHealth reveals that the monthly national average comes in at about $450 for individuals and $1,150 for families. Some factors that dictate these numbers include age, location, income, number of dependents (if any), healthcare history, among other items. Two people with similar coverage may pay different amounts if they reside in entirely different parts of the United States. Another study shows that $648 is a normal premium for a male in their 20s in Wyoming. This doesn’t necessarily mean he has to pay that each month though. Employer-sponsored health plans will usually cover at least half of the actual premium cost.

It can be a little trickier for those who are responsible for their healthcare. Each state should be able to provide residents with some guidance as to what they can expect to pay as an individual.

How can I estimate my premium cost?

The amount you pay for your premium has a direct correlation with your out-of-pocket costs and what is covered by your insurance company. Whether or not a premium is ideal, depends on the individual and their healthcare needs. For instance, someone who barely visits the doctor might not care about high out-of-pocket costs if it means paying very little each month. In this case, it’s helpful to estimate how much you would save by choosing a lower premium. Compare that difference to a reasonable out-of-pocket cost you might have with the lower premium insurance plan. It makes sense that some people choose this route as it can be a way to save if your needs match up.

People who visit the doctor frequently will likely have a higher premium, to offset the lower out-of-pocket costs. If you have any condition that requires regular medical attention or treatment, you’ll want to look into options with lower out-of-pocket costs, the amount of money you stand to save should make up for the higher premium costs.

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What is individual health insurance?

The Affordable Care Act was put in place to help ensure that everyone has access to healthcare plans. This act allows people to seek insurance through private companies or enroll through the marketplace. This public option operates on a sliding scale according to the individual’s financial needs. ACA plans are offered through a government exchange or “marketplace.” Each state has its own resources and website for residents to explore different healthcare options.

The way the ACA plans are broken down reflects the same logic as private healthcare plans. The more you pay upfront, the less you pay later, and vice versa. They use a simple, metallic naming system with “bronze” offering the lowest premium and highest out-of-pocket costs, and “platinum” offering the highest premium and lowest out-of-pocket costs. According to eHealth, these plans must include “10 essential benefits, such as coverage for hospitalizations, outpatient and preventive care, maternity and child services, lab tests, rehabilitation services, mental health treatment, and prescription drugs.”

Are there any ways to lower my premium?

Healthcare is expensive, even when you have coverage. If you need help with covering your healthcare expenses, you can look into a few different options. Government subsidies, Medicaid, Medicare, HSAs, and supplemental plans are some of the ways you can save on your premium costs.

If you want to see if you are eligible for government subsidies, sometimes known as “premium tax credits.” Healthcare.gov has a tool where you can fill in some of your individual or family data get immediate results. From there, you’ll be able to get a solid idea of where you stand and what assistance you might be eligible for. If you find that you aren’t entitled to receive any financial assistance, there are other avenues you can try to save on your premiums.

Medicaid and Medicare are both helpful when it comes to saving on health insurance premiums. Each state has its own Medicaid program that provides healthcare to low-income families and individuals. “CHIP” programs provide health insurance plans to children under the Medicaid program. If you think you might be eligible under this program, your state department of insurance should be able to guide you through the process. If you are not eligible to enroll, they should be able to offer a fitting suggestion to help you save.

Medicare provides healthcare coverage for seniors aged 65 and over. Those who are still working or have a disability are still entitled to enroll under this program. Participants do not usually have to pay a premium for Medicare Part A as long as they have worked and paid Medicare taxes for 10 years.

If you’re a smoker looking for a reason to quit, you’ll be entitled to a lower premium after you’ve kicked the habit for a specified time. Details like these will vary by state, but tobacco use will increase your premium no matter where you live.

Conclusion

As an essential component of every health plan, health insurance premiums are necessary for every individual or head of household to understand. If you choose a premium based on the upfront cost, you might find yourself owing a lot more in healthcare expenses down the road. Anyone who has the responsibility of enrolling in their own healthcare plan (or selecting one with an employer) should take equal responsibility in trying to understand as much as possible before coming to a decision.

If you find that you’re still uncertain of what type of plan might suit you the best, there are many resources to guide you. If you plan to gain coverage through your employer, you can contact someone in your HR department to go over your options. Management is required to ensure their employees receive ample explanation of the benefits available to them. If an employee does not wish to take advantage of that, that’s up to them. However, it certainly helps to take advantage of any free resources available to you. If you plan to seek coverage on your own, don’t worry. There are tons of knowledgeable agents and representatives out there who are eager to help you. If you aren’t sure where to begin, you can ask friends, family, or colleagues for a referral, or just go right to your state marketplace website.

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