How Does Your Health Insurance Premium Work?
Having health insurance means having coverage for the medical care that you need, but it also means having a lot of different costs to consider. You have to think about your deductible, your copays and coinsurance, and last but definitely not least, your premium. Your premium is the amount that you pay each month to maintain your coverage, so it is generally the most consistent cost associated with your health insurance. This amount, while consistent each month, can vary wildly based on the plan you choose. There is a method to how they are calculated and how they work, especially since the passage of the Affordable Care Act (ACA).
This makes sense: older people tend to use more medical services than younger people do. Healthcare.gov estimates that you could find yourself paying three times as much for your premiums as you age.
Housing costs aren’t the only costs that vary based on where you live. Your premium can be affected by the rules of your state, as well as by how much competition for your business there is in your area. The more insurance companies that are competing for your business, the lower your premium.
3.Who’s covered by your plan:
An individual plan that covers only your medical care will obviously be cheaper than a family plan that covers your spouse and your children.
Thanks to the ACA, there are a lot of things that insurance can’t charge you more for, but there is one thing: smoking. In some cases, if you use tobacco, you could be charged a 50% surcharge on your premium. That means a plan that has a $300 premium for nonsmokers could cost a smoker $450.
5.The plan you choose:
Under the ACA, there are four types of plans: Platinum, Gold, Silver, and Bronze. There is actually a fifth plan, as well, called a catastrophic plan, but these plans are only available to people who are under 30 and/or in financial trouble. Each of these plans has a different premium to deductible ratio, a concept we will look at below.
Having a plan with a lower premium but higher deductible means that, while you might have a small monthly payment, you will have to shell out a lot more in out-of-pocket costs before your plan will start to pay its share. If you are young and healthy and rarely see the doctor, this could work out to be better financially for you, but you do have to be prepared for the possibility of a big medical expense. If you are older, or have a chronic condition, it probably makes more sense to choose a plan with a higher premium and lower deductible, since you will probably hit your low deductible before the year is up.
Because there are so many factors that go into determining the cost of your premium, it’s difficult to even give an average amount that people pay. There is also a lot you need to consider when making your choice, including all of the out-of-pocket costs, and the rules of your policy (for example, HMOs have lower premiums than PPOs do, but also smaller networks of doctors that you can see). If you’re looking for a plan that fits your needs and your budget, the best thing to do is to contact one of My MedaHealth agents and let them break down your options for you. We’ll take all of the guesswork out of figuring out your premium, and will get you the best plan at the best price. For fast, accurate quotes, get started with us today!