If you use health insurance to help cover your health care costs, you’re likely paying a monthly premium every month. This fee entitles you to the coverage outlined in your health insurance plan. Health insurance, including premiums, can be tricky to understand. Read on for a comprehensive review of health insurance premiums and how they work.
What Is a Health Insurance Premium?
A health insurance premium is the monthly amount you pay for the health insurance plan you choose. “Your premium is usually billed on a monthly basis like a subscription,” explains Josephine Pepa, pharmacist and CEO of Over Your Counter, an online service aiming to provide personalized guidance and education about wellness and self-care. Some plans may require premium payments quarterly or annually, adds Linda Chavez, founder and CEO of Seniors Life Insurance Finder.
Unfortunately, incomes in the U.S. don’t always keep up with the increasing costs of premiums and deductibles. In fact, a study conducted by the Commonwealth Fund found premium contributions and deductibles in employer health plans consumed 11.6% of median household income in 2020—up from 9.1% a decade earlier.
How Health Insurance Premiums Work
There are a number of factors that affect how much you pay for your health insurance premium. “If your plan allows access to a vast network of providers, your monthly premium will be higher than it would be if your plan only allows access to a handful of doctors and hospitals.” says Pepa. “The cost of your premium also depends on the number of dependents covered, your location, age, the specific plan category chosen and tobacco use.”
Different Kinds of Health Insurance Premiums
Health insurance plans fall under four main categories, according to the Healthcare.gov Marketplace: Bronze, Silver, Gold and Platinum. “While Bronze plans typically have lower monthly premiums, their out-of-pocket costs are higher,” says Pepa. “Platinum plans, on the other hand, often come with higher premiums and lower out-of-pocket costs.”
Ways to Reduce Your Health Insurance Premium
If you’re concerned about the cost of your health insurance premium, here are several tips that couls help you lower the cost.
Purchase as Early as Possible
“Age is the most important factor in determining your premium,” says Chavez. “Insurance companies charge higher premiums to older people. Therefore, the earlier you purchase health insurance, the lower your premium will be.”
Choose the Right Plan
There are many different types of health insurance plans available. Some plans have higher premiums than others. You should choose a plan that has a premium you can afford while still providing the coverage you need, says Chavez. “If you use your health insurance often, paying a higher premium each month will generally save you in expenses you have to pay out of pocket, but if you rarely use medical care, opting for a low monthly premium with less coverage will likely save you money,” says Brynna Connor, M.D., a health care ambassador at NorthwestPharmacy.com.
Participate in Preventative Care
Taking advantage of preventative care services, such as blood pressure tests and cancer screenings, may also help reduce your premium price, says Todd Ackerman, an independent agent at World Insurance Associates in Burlington, Iowa. By doing so, you can catch issues early on before they become more serious and expensive—and potentially increase the cost of your premiums. Fortunately, most health insurance plans cover preventative care.
Lead a Healthy Lifestyle
Ackerman also recommends doing your best to practice habits that can keep you healthy and lower your premiums. Eat healthy, exercise regularly and try to get at least eight hours of sleep each night.
The Affordable Care Act allows insurance companies to charge smokers up to 50% more for premiums. If you smoke, Pepa encourages you to quit to save money on your premium (and improve your long-term health).
Enroll in a Health Savings Account (HSA)
A health savings account is a personal savings account for health care expenses that you own. The money you deposit is not taxed. If possible, Pepa recommends opening an HSA to help cover premium and other health care costs.
Sign Up for an Account on Healthcare.gov
Even if you already have health insurance, Dr. Connor recommends creating an account on healthcare.gov and following the instructions to apply for insurance. By doing so, you can learn about potential insurance subsidies available to you. Since the subsidies change, it’s a good idea to reapply every year.
Conduct an Annual Review
To find areas of overlap and reduce your premiums, Anthony Puopolo, M.D., chief medical officer of the telemedicine company Rex MD, says to reevaluate your prescription drug needs, the amount of needed doctor visits and tax break options every year.
Other Major Considerations for Health Insurance Premiums
When exploring health insurance plans and premiums, Chavez suggests considering the following factors.
Healthy people are less likely to make claims on their insurance policies. For this reason, you’ll likely pay a lower premium if you’re in good health than someone who is in poor health.
If you live a risky lifestyle in which you smoke or engage in other dangerous activities, your premiums will be more expensive than someone who lives a healthier lifestyle.
Where you live may also affect your health insurance premium. “If you live in an area with a high cost of living, you will likely pay a higher premium than someone who lives in a less expensive area,” says Chavez.
Your Family History
If you have a family history of health conditions, such as heart disease or cancer, you will likely pay a higher premium than someone who does not have a family history of chronic illness.
If you have a job that requires you to travel or work in dangerous conditions, you will likely pay a higher premium than someone with a sedentary job.
“You really have to consider what you need from your health insurance plan—and not plan for being 100% healthy all the time, even if you’re young and have been healthy previously,” adds Dr. Connor. “Illness or injuries can happen unexpectedly, so be realistic about what you need and what you can afford.”
- State Trends in Employer Premiums and Deductibles, 2010–2020. The Commonwealth Fund. Accessed 5/23/2022.
- Premium. Healthcare.gov. Accessed 5/23/2022.
- Health Savings Account (HSA). Healthcare.gov. Accessed 5/23/2022.
- Preventive Care . U.S. Department of Health & Human Services. Accessed 5/23/2022.
- The Health Plan Categories: Bronze, Silver, Gold & Platinum. Healthcare.gov. Accessed 5/23/2022.
- Can I Be Charged Higher Premiums in the Marketplace if I Smoke? Kaiser Family Foundation. Accessed 5/23/2022.< /small>
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