Everything You Need to Know About Health Insurance Premiums

By Terez Malka, MD
Medically reviewed checkmarkMedically reviewed
April 8, 2022

Most  Americans have some form of health insurance. Health insurance is necessary not only for your well-being but also for your financial security.

For example, if you or a family member becomes seriously ill or is injured in an accident, your expenses could be astronomical without health insurance.

If you work for a company that offers healthcare coverage, your employer will likely cover some, if not all, of your health insurance premiums.

Employers typically cover 83% of a single person’s premium and 73% of a family’s premium. 

Those who are self-employed can purchase insurance through an individual plan or through the Affordable Care Act (ACA) health insurance exchange.

If you qualify, there are tax credits available under Obamacare to offset your insurance expenses.

There are four types of health insurance plans available.

Take time to look closely at your options before making a decision, since there are restrictions and requirements for each type.

When you’re choosing which of the plans will be best for you and your family, think about what kind of treatment you’ve needed in the past, and consider what may be necessary for the future.

Maybe you have a child with asthma. If that’s the case, access to your pediatric pulmonologist will be a priority, so you’ll want to find a plan that they accept in your chosen doctor’s office.

Or, if you plan to become pregnant soon, you’ll want your OB/GYN to be part of your health care coverage. 

  • HMO (Health Maintenance Organization): Lower premiums (monthly payments) but fewer options for doctors. You must stay in-network for coverage, except for emergencies. Referrals are required for specialists.
  • PPO (Preferred Provider Organization): More choices of doctors, but higher premiums. You can go out of network, but your costs will be higher if you do. No referrals are required for specialists.
  • EPO (Exclusive Provider Organization): Lower premiums but fewer options for providers since you must stay in-network, except for emergencies. Unlike HMOs, an EPO plan doesn’t require referrals to specialists. 
  • POS (Point of Service): In-network providers are less costly than out of network with this plan. Referrals to specialists are required.

In this article, I’ll explain what a health insurance premium is and how the amount you pay in premiums impacts the level of coverage you have.

Then, I’ll discuss health insurance premiums and Medicaid and Medicare, and I’ll give you some tips on lowering your premium.

Finally, I’ll lay out the factors that influence the cost of health insurance premiums.

What Is a Health Insurance Premium?

A health insurance premium is the amount of money you pay each month for health insurance coverage for you and your family.

While it may seem like finding the lowest monthly premium for coverage should be your priority, that’s not always the case.

Lower premiums generally mean less coverage and higher deductibles and copays, which can quickly add up, especially if you or someone in your family has a chronic health problem and sees a doctor frequently.

Coverage Categories

Insurance plans appear in four metal categories—bronze, silver, gold, or platinum:

  • Bronze: These plans may have very low premiums. However, their high deductibles and lower level of coverage can offset those savings. Bronze plans are best for younger, healthier people who take few medications and don’t see a medical professional very often.
  • Silver: Check to see if you qualify for cost-sharing reductions (CSRs). You’ll have lower copays and deductibles if you do, but only if you enroll in a silver plan. 
  • Gold or Platinum: These plans have higher monthly premiums, but if you take multiple prescription medications or visit a doctor or other medical professional regularly, one of these plans may be the best choice for you, since they may cover more of your care.

There is also the option for a catastrophic coverage plan, but only those under 30 and people with a hardship exemption qualify for catastrophic insurance.

Costs Beyond Premiums

Your health insurance premium cost will vary, depending on what kind of coverage you get and whether you get it through an employer, through the ACA, or as an individual through a plan not connected to a government program.

Along with your premiums, there are other costs involved in your health care coverage. 

Additional expenses include your deductible, which is the amount you pay out of pocket before your health insurance coverage kicks in and copayments and coinsurance, which are the payments you make along with the coverage you have.

An out of pocket maximum is the highest amount you’ll pay before your insurer pays 100% of your medical bills.

A tax credit is available to lower your monthly premium if your employer doesn’t cover you and your family and you enroll in a plan through the Health Insurance Marketplace.

There are maximum income levels for these tax credits, which will be determined when you fill out your application.

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Special Considerations

Both Medicaid and Medicare have different health insurance premium policies from either ACA or private insurance companies.

Medicaid 

The guidelines for Medicaid premiums are based on the family’s income or individuals covered.

No premium charge is allowed for those with incomes less than 150% of the  Federal Poverty Level (FPL).  

Medicare

Medicare premiums for each plan—A, B, C, and D— vary.

Part A: Medicare part A is free for most people over 65. However, for those who don’t have enough work history, the premium is $299 per month. This plan covers inpatient hospitalization, skilled nursing, hospice, and home health care services. There are limits on how much is covered.

Part B: The standard premium for Medicare part B is 170.10 per month, but it goes up incrementally as your income rises, with the first bump starting at joint tax returns with income reported at $182,000 per year or single tax returns at $91,000 per year. 

Part C: Also known as Medicare Advantage, is a private insurance alternative to Medicare parts A, B, and D combined. There are a variety of plans to choose from with different premiums depending on which you choose. 

Part D: Medicare part D is your prescription coverage. There are many options available. Check different plans’ formularies to see whether the medications you take are covered—though sometimes plans will change their allowed medications (formularies) without notice. You’ll pay a monthly Medicare fee in addition to the premium charged by your part D plan based on your income.

How Can I Lower My Premium?

You can lower your premiums by reducing your benefits or by moving from a PPO to an HMO though that will limit your out-of-network options.

If you’re self-employed and paying for your insurance out-of-pocket, your premiums are tax-deductible, so make sure to use that benefit on your tax returns. 

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Factors that Influence Health Insurance Premiums

Premiums are set using five categories.

These are age, location (where you live can significantly impact your health insurance costs), tobacco use, family or individual plans, and which category of coverage you choose.

The most considerable influence on your health insurance cost will be your income. This is because premium subsidies are based on income.

If you qualify, those subsidies can offset a large portion of your insurance premium—in fact, in some cases, you may not have to pay anything at all.

Did you know you can get affordable primary care with the K Health app? Download K to check your symptoms, explore conditions and treatments, and if needed text with a provider in minutes. K Health’s AI-powered app is HIPAA compliant and based on 20 years of clinical data.

Frequently Asked Questions

What does premium mean in health insurance?
Premium refers to the monthly fee you pay for your health insurance. This fee is separate from any deductibles or copays. Your premium guarantees that you have health coverage. It's essential to have health insurance even if you never use it in case of an emergency, sudden illness, or an accident.
What is an insurance premium, and how does it work?
You pay an insurance premium to ensure you have insurance coverage when you need it. You pay the premium monthly whether or not you use the insurance that month. Insurance premiums must be paid monthly, or most plans, after 30 days, will terminate.
What is an example of an insurance premium?
In 2020, annual premiums for a family of four averaged $21,342. Employers picked up 73% of that cost, leaving families with an annual expense of around $5,500.

K Health articles are all written and reviewed by MDs, PhDs, NPs, or PharmDs and are for informational purposes only. This information does not constitute and should not be relied on for professional medical advice. Always talk to your doctor about the risks and benefits of any treatment.

Terez Malka, MD

Dr. Terez Malka is a board-certified pediatrician and emergency medicine physician.

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