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If you use health insurance to help cover your medical expenses, you’re probably paying a monthly fee. This charge entitles you to the benefits described in your health insurance policy. Health insurance, including costs, may be complex to understand. Continue reading for an in-depth look at health insurance rates and how they function.
What Is a Health Insurance Premium?
A health insurance premium is the monthly fee for the health insurance plan you choose. “Your premium is generally invoiced monthly, like a subscription,” says Josephine Pepa, pharmacist and CEO of Over Your Counter, an online service that provides individualized health and self-care instruction. According to Linda Chavez, founder and CEO of Seniors Life Insurance Finder, certain policies may need premium payments quarterly or yearly.
Unfortunately, income in the United States does not always keep pace with rising premiums and deductibles. In fact, a Commonwealth Fund analysis projected that premium payments and deductibles in employer health plans consumed 11.6 percent of median family income in 2020, up from 9.1 percent a decade before.
How Health Insurance Premiums Work
A variety of variables influence how much you pay for your health insurance premium. “If your plan gives you access to a large network of providers, your monthly premium will be more than if you just have access to a few physicians and hospitals,” adds Pepa. “The cost of your premium is also determined by the number of dependents covered, your location, age, the precise plan type selected, and your usage of tobacco.”
Different Types of Health Insurance Premiums
According to the Healthcare.gov Marketplace, health insurance plans are divided into four categories: bronze, silver, gold, and platinum. “While Bronze plans offer lower monthly premiums, their out-of-pocket payments are greater,” Pepa explains. “Platinum plans, on the other hand, are often associated with higher premiums and reduced out-of-pocket payments.”
Methods to Lower Your Health Insurance Premium
If you’re worried about the cost of your health insurance premium, here are some suggestions to help you save money.
Purchase as soon as possible
“The most essential aspect in deciding your premium is your age,” adds Chavez. “Insurance firms charge elderly individuals greater rates. As a result, the sooner you get health insurance, the cheaper your premium.”
Select the Right Plan
There are several kinds of health insurance policies available. Some plans have more expensive premiums than others. According to Chavez, you should choose a plan with a price you can afford while yet offering the coverage you need. “If you use your health insurance frequently, paying a higher monthly premium will generally save you out-of-pocket expenses,” says Brynna Connor, M.D., a health care ambassador at NorthwestPharmacy.com. “However, if you rarely use medical care, opting for a low monthly premium with less coverage will likely save you money.”
Take part in Preventative Care
According to Todd Ackerman, an independent agent with World Insurance Associates in Burlington, Iowa, taking advantage of preventive care services such as blood pressure exams and cancer screenings may also help decrease your premium price. This allows you to detect problems early on, before they become more severe and costly—and may raise the cost of your premiums. Most health insurance policies, thankfully, include preventive care.
Maintain a Healthy Lifestyle
Ackerman also advises trying your best to maintain healthy behaviors while lowering your insurance costs. Eat well, exercise often, and get at least eight hours of sleep each night.
Quit Smoking
The Affordable Care Act permits insurance carriers to charge smokers up to a 50% premium increase. Pepa urges smokers to quit in order to save money on their insurance premiums (and improve your long-term health).
Sign up for a Health Savings Account (HSA)
A health savings account is a personal savings account for your own health-care needs. The funds that you deposit are not taxed. Pepa suggests forming an HSA if feasible to assist offset premiums and other health care expenditures.
Create an Account on Healthcare.gov
Dr. Connor suggests opening an account on healthcare.gov and following the procedures to apply for insurance even if you currently have health insurance. You may learn about possible insurance subsidies available to you by doing so. Because the subsidies vary each year, it’s a good idea to renew every year.
Conduct an Annual Evaluation
Every year, Anthony Puopolo, M.D., chief medical officer of the telemedicine business Rex MD, recommends reevaluating your prescription medication requirements, the number of required doctor visits, and tax break alternatives to uncover areas of overlap and minimize your rates.
Other Important Factors Affecting Health Insurance Premiums
Chavez advocates examining the following aspects while researching health insurance plans and rates.
Your Health
People who are in good health are less prone to file insurance claims. As a result, if you’re in excellent health, you’ll probably pay a smaller premium than someone with health problems.
Your Lifestyle
If you live a risky lifestyle, such as smoking or engaging in other dangerous activities, your premiums will be higher than if you live a healthy one.
Your Location
Your health insurance premium may also be affected by where you live. “If you live in a high-cost-of-living location, you will most likely pay a much higher premium than someone who lives in a lower-cost area,” Chavez adds.
Your Family History
If you have a family history of chronic sickness, such as heart disease or cancer, you will almost certainly pay a higher premium than someone who does not.
Your Job
If your job needs you to travel or work in hazardous settings, you will most certainly pay a greater premium than someone who works sedentary.
“You really have to examine what you need from your health insurance plan—and not plan on being 100 percent healthy all of the time, even if you’re young and have previously been healthy,” Dr. Connor says. “Illness or injury may strike at any time, so be realistic about what you need and what you can afford.”
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Do I need to sign up for Medicare when I turn 65?
It depends on how you get your health insurance now and the number of employees that are in the company where you (or your spouse) work.
Generally, if you have job-based health insurance through your (or your spouse’s) current job, you don’t have to sign up for Medicare while you (or your spouse) are still working. You can wait to sign up until you (or your spouse) stop working or you lose your health insurance (whichever comes first).
– If you’re self-employed or have health insurance that’s not available to everyone at the company: Ask your insurance provider if your coverage is employer group health plan coverage (as defined by the IRS.) If it’s not, sign up for Medicare when you turn 65 to avoid a monthly Part B late enrollment penalty.
– If the employer has less than 20 employees: You might need to sign up for Medicare when you turn 65 so you don’t have gaps in your job-based health insurance. Check with the employer.
– If you have COBRA coverage: Sign up for Medicare when you turn 65 to avoid gaps in coverage and a monthly Part B late enrollment penalty. If you have COBRA before signing up for Medicare, your COBRA will probably end once you sign up.
Answer a few questions to find out when you need to sign up.
How do I sign up for Medicare?
If you’re already getting benefits from Social Security (or Railroad Retirement Board), you’ll automatically get Medicare. If not, you’ll need to sign up.
How does Medicare work with my job-based health insurance?
Keep in mind that:
– Most people qualify to get Part A without paying a monthly premium. If you qualify, you can sign up for Part A coverage starting 3 months before you turn 65 and any time after you turn 65 — Part A coverage starts up to 6 months back from when you sign up or apply to get benefits from Social Security (or the Railroad Retirement Board).
– If you have a Health Savings Account, you and your employer should stop contributing to it 6 months before you sign up for Part A (or apply to start getting Social Security benefits) to avoid a tax penalty.
| I’m still working and… | How my coverage works with Medicare (Part A & Part B): |
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| My (or my spouse’s) job has less than 20 employees. |
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| My (or my spouse’s) job has more than 20 employees. |
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I (or my spouse) get a stipend from my employer to buy my own health insurance. OR I (or my spouse) am still working, but I don’t have health insurance through that job. |
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Do I need to get Medicare drug coverage (Part D)?
You can get Medicare drug coverage once you sign up for either Part A or Part B. You can join a Medicare drug plan or Medicare Advantage Plan with drug coverage anytime while you have job-based health insurance, and up to 2 months after you lose that insurance.
Even if you have a Special Enrollment Period to join a plan after you first get Medicare, you might have to pay the Part D late enrollment penalty. To avoid the Part D late enrollment penalty, don’t go 63 days or more in a row without Medicare drug coverage or other creditable drug coverage.
If you have other drug coverage: Ask your drug plan if it’s “creditable drug coverage.”
Each year, your plan must tell you if your non-Medicare drug coverage is creditable coverage. Keep this information — you may need it when you’re ready to join a Medicare drug plan.
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If you: |
Do this: |
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Don’t have any drug coverage |
Part D late enrollment penalty
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Have drug coverage that’s creditable |
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Have drug coverage that’s not creditable |
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