Your health insurance premium depends on which plan and service(s) you select, along with premium, deductible, copayments and coinsurance costs.
At eHealth, our Health Insurance Price Index Report will give you an idea of the average costs.
Premiums
Your monthly premium payment for health insurance is the premium, an amount paid in exchange for its promise of coverage – such as doctor visits or hospital stays. Premiums only make up one part of total healthcare spending – other costs may include deductibles, copayments or coinsurance when you use services covered under your health plan.
American’s tend to focus a great deal of their attention on the cost of health care coverage, so it is essential that they understand exactly what makes up its overall price.
Your monthly premium and the deductibles/copayments due when using coverage will have an impactful influence on its cost; additionally, plan type selection could alter this cost significantly.
Based on your household income, you may qualify for premium tax credits and cost-sharing subsidies through the Health Insurance Marketplace. If successful, these could help lower out-of-pocket health care expenses and make a PPO plan more cost effective.
Other factors affecting health insurance costs include state and federal laws dictating what plans must cover as well as economic factors like inflation. When inflation goes up, health insurance costs tend to follow suit and go up accordingly.
Recent market conditions show health insurance premiums increasing faster than last year, in part due to insurers withdrawing from competition and lessening price competition.
Age, location and the plan you enroll in all have an effect on the cost of health insurance premiums; premiums tend to be higher for people aged 45+ who smoke as their premiums can increase threefold compared to nonsmokers. Your health plan type also has an effect on premium costs: bronze plans are typically less costly than Silver or Gold plans.
Deductibles
There are various factors that impact how much health insurance costs, including coverage type, income level, location and children. Deductibles, copayments and coinsurance costs also play a part in your total healthcare cost.
Your annual deductible is the annual payment you must make before your insurance starts covering any costs. Deductibles vary by plan, but generally start around one dollar of premium payment; for instance if your monthly premium is $200 then your deductible could be $800 each year before plan benefits kick in – known as your “out-of-pocket maximum.”
Understanding this limit is key in order to plan for healthcare costs throughout the year. It represents the maximum amount you might spend on deductible, copayments and coinsurance during that year; once this threshold has been met, your health plan will begin covering 100% of healthcare expenses.
If you opt for a high-deductible plan, your out-of-pocket expenses could exceed your annual out-of-pocket maximum more quickly; conversely a lower deductible plan could lower costs throughout the year.
Once your deductible has been met, additional fees such as copayments and coinsurance may still apply. Copayments are flat dollar amounts such as $25 for doctor visits while coinsurance is calculated based on a percentage of service cost; both forms of fees depend on what kind of care is delivered according to your health plan and type of care provided.
Many households struggle to afford the higher deductibles associated with private health plans, with half of all single-person households lacking the resources to cover an employer plan deductible of $2,000 and two in three unable to meet family deductibles of $12,000. Luckily, short-term health plans offer affordable coverage options lasting three to 364 days that often cost 54% less than exchange health insurance plans.
Copayments and Coinsurance
As an enrollee of a health insurance marketplace, you know that premiums and deductibles are just the start when it comes to out-of-pocket expenses. Copays and coinsurance should also be factored in. A copay is a set fee paid each time a covered health service is received while coinsurance is a percentage of cost that you pay once your deductible has been reached; an average American pays $25 when visiting their doctor and $44 when visiting specialists.
Though these out-of-pocket costs may appear excessive, they will have no lasting ramifications on your total health care spending. Instead, these costs serve to discourage unnecessary medical services from being rendered and therefore keep costs down by decreasing consumption of healthcare services.
As part of its comprehensive protection for individuals against excessive health care spending, the Affordable Care Act also limits annual out-of-pocket expenses to $9450 for an individual plan and $18,900 for family plans; once these limits have been reached, your health plan begins covering costs until its next renewal.
Health insurance costs vary significantly by state and region, with an individual marketplace Silver plan costing $584 monthly on average (but could be reduced through subsidies), while employer-sponsored coverage averaged $12,331 annually in 2016.
The Affordable Care Act offers subsidies for those who qualify, helping reduce monthly health insurance plan premiums and making coverage more attainable for people earning four times or less than federal poverty levels. If eligible, those may also be eligible for additional tax breaks such as these subsidies.
As the chart below indicates, residents of Alaska and Massachusetts pay the highest premiums for private health insurance plans while those in Tennessee, Texas and South Carolina enjoy lower premiums due to increased competition between insurance providers in these states. Alaska and Massachusetts tend to pay the highest rates while Tennessee, Texas and South Carolina tend to have the lowest premiums as states with few insurers tend to have higher premiums while states that offer multiple plans tend to offer reduced rates.
Out-of-Pocket Maximums
Out-of-Pocket Maxes are annual limits that govern how much a patient must pay in a year before health insurance begins covering expenses, including deductibles, copayments and coinsurance payments. These caps are set by the Affordable Care Act and change every year when plans purchased through health insurance marketplaces – currently the limit for individuals is $9450 while $18,900 stands for families.
Jane is in need of tests for cancer, which adds up quickly due to their non-routine nature. She pays 20% coinsurance as her share, counting towards her annual maximum out-of-pocket limit of $4,000. At that point, health insurance starts covering her costs.
2021’s maximum annual out-of-pocket limits for marketplace plans average at $4,272 for single coverage and $8,350 for family coverage, respectively. While this amount might seem large at first, most families could reach their limit over time with careful budgeting and careful analysis of cost sharing requirements before choosing their health plan.
Though premium, deductible and out-of-pocket maximum are key elements in calculating the cost of health insurance plans, care needs are also an integral component. If a person expects regular medical services they may want to select a plan with lower monthly fees but higher deductibles – these plans still cost more in total, but will cover less of their care needs.
The Marketplace offers four categories of health plans–Bronze, Silver, Gold and Platinum–which vary based on how they share costs of care with consumers. If an individual is considering health plan options on this platform, it’s essential they become acquainted with its different levels of coverage so they can select an ideal plan that meets their individual needs.