The average person in the United States pays $452 per month for Marketplace health insurance.1 But the costs of health insurance coverage vary widely based on many factors.
Maybe you just turned 26 and you’re out of your parents’ plan (#adulting?). Or maybe you’re facing a job loss and need to replace your previous employer’s coverage. or you are simply looking for other options besides your employer’s plan. No matter what your situation is, you may be wondering: how much does health insurance cost?
everyone knows that health insurance is expensive. can quickly absorb the life of your monthly budget. but how expensive is it? and why is it so expensive? Are there ways to pay less?
well, you’re in the right place! I’ll walk you through everything you need to know about health insurance costs, what all those terms mean, and what factors make up that high price.
Basic terms of health insurance
If you’re just learning the ins and outs of health insurance, I feel your pain. health insurance is a complicated thing, like complicated rocket science. you may not even know where to start. (And if you’re wondering if health insurance is something you need, start here.)
Before we look at how much health insurance costs, let’s take a look at some plain language terms.
First, there are only two main types of health insurance: private and public.
Private coverage is health insurance through your employer, union, or even the military. You can also get it on your own through the government marketplace—healthcare.gov. (Quick history lesson: The marketplace, or exchange, was created in 2014 after the passage of the Affordable Care Act, or “Obamacare.” It provides access to about 175 insurance companies. In 2021, open enrollment has been extended to The 15th of August).
Public insurance is provided by the government. includes medicare (for ages 65 and older), medicaid (for low-income families), or care from the department of veterans affairs.
Your premium is the amount you pay monthly (sometimes annually) for your coverage.
The deductible is the amount you must pay before your insurance company begins to contribute.
The maximum you pay out of pocket is the limit of what you will pay in a year. For example, if your plan’s out-of-pocket maximum is $8,000, once you pay that amount, your insurance company will cover anything over that amount for the rest of the year. It acts as a financial safety net so you don’t totally break the bank on medical costs.
what is individual health insurance?
Individual health insurance is just another term for private coverage as opposed to a group plan (such as those offered by an employer). it’s just the kind you get on your own, even if you include family members in your plan.
You may be looking for individual health insurance for a couple of different reasons. if your employer doesn’t offer it, if it’s too expensive, or if you retire before age 65. You’ll also need it if you work part-time, are unemployed, or self-employed.
Plans offered in the marketplace are also examples of individual health insurance.
now. . . Let’s dive into the numbers.
what is the average cost of health insurance?
You may be wondering, how much does individual health insurance cost? this is what you can expect. The average person in the United States pays $452 per month for Marketplace health insurance in 2021.2 The average family pays $1,779 per month.3
But the cost of health insurance varies widely based on a number of factors. some things are under your control, others are not. Things like your age, how many people are on your plan, how much coverage you need, where you live, and who your employer is all play a role in the price of your coverage.
Here’s a breakdown showing average costs based on your state:
Kaiser Family Foundation, 2021.
Is employer coverage cheaper?
many people assume employer coverage is the best or cheapest option. in 2020, approximately 157 million people chose their employer-based health care plan.4
but is it? Should you always choose your employer’s health coverage or should you opt for individual health insurance?
employer plans can sometimes be less expensive since the company contributes part of the costs. Your employer can also sometimes get a better rate because he’s buying a lot of insurance packages. but not always. sometimes it can be cheaper to get health insurance on your own. While it may take a little more work on your part, if you’re looking to save money on your health insurance costs, you may want to skip employer coverage and look into an individual plan.
Is health insurance getting more expensive?
It certainly feels that way. And it’s true that over the last decade, health care costs have increased significantly. the average family is paying 55% more on their premium in 2020 compared to 2010 according to the kaiser family foundation.5 and that number is up 22% from 2015.6 but premiums are only up 4% when comparing 2020 to 2019.7
Health care costs also change based on where you live. in some states they are up, in other places they are lower.
If you feel like you’re drowning in skyrocketing health insurance costs, there are a few ways to save money on health insurance. do not lose hope. you always have options, even if it only helps your budget a little. There are also some ways to save on health care costs that your insurance doesn’t cover.
And if you’re trying to cut costs while paying down debt, or if you’re just starting to budget and barely making ends meet, you may want to choose a plan with a high deductible and lower premium that will kick in if you you have serious medical problems or an accident. This allows you to focus on your needs (at ramsey, we call them the four walls) before you tackle an expensive health care plan.
what affects my health insurance premium costs?
your gender and marital status
Under the Affordable Care Act, insurance companies can no longer charge consumers more based on their gender.8 But other factors make a difference. For example, if you are married with children, you can expect to pay more to meet your family’s needs. keep in mind that if your family’s income falls below a certain level, a tax credit could save you money.9 (check health care.gov to see if you and your family qualify).
But marital status isn’t the only thing that determines how much you could be shelling out. Here are some other things insurance companies look for.
your personal data
Age: When it comes to the cost of health insurance, age makes a difference, too. the older you are, the more you pay for health insurance, sometimes up to three times as much.10
Smoking: If you smoke, insurers can charge you up to 50% more for health insurance, unless you live in these seven states: California, Connecticut, Massachusetts, New Jersey, New York , Rhode Island, and Vermont.11 These states have passed laws that prohibit overcharging smokers. for everyone else, quit and you could cut your bill in half.
Location: Premiums vary by location. for example, in 2020, monthly premiums in the Northeast averaged $655 but only $626 in the Midwest.12 One family living in the Northeast averaged $1,929 compared to $1,716 in the South.13
different types of plans
Shopping for a health insurance plan can sometimes feel like being in a grocery store and looking at lines of the same product for what seems like hours, only less exciting and much more expensive! but comparing plans could save you money. This is because the type of plan you choose also affects your health insurance costs.
These are the plans and networks you can buy on the Health Insurance Marketplace:
- Health Maintenance Organization (HMO): HMO plans limit you to doctors within a certain network. These are usually the most stringent plans, but may have lower premiums.
- preferred provider organization (ppo): ppo plans are similar to hmos but give you a little more flexibility. You’ll pay less for health care if you use a provider in the plan’s network. you are allowed to access out-of-network providers, but they are more expensive.
- exclusive provider organization (epo): epo plans limit you to in-network providers, except in emergencies.
- Point of Service (POS): POS plans offer benefits such as lower medical bills if you use doctors, hospitals, and health care providers in the plan’s network. Please note that you will need a referral from your primary care physician to see a specialist.
- high deductible health plan (hdhp): hdhp plans are exactly what they sound like. You pay a higher than normal deductible but get much lower premiums. you can also use pre-tax health savings accounts (hsas) with these.
- Short-term plan: Short-term plans are temporary health insurance policies that bridge the gap when you’re between jobs. usually three months to just under a year.
- cobra plan: Not to be confused with a deadly snake, cobra plans are similar to short-term plans but last longer. help you avoid a gap in your coverage if you lose your job.
- catastrophic plans: catastrophic plans apply mainly to young adults under 30 years of age. they have lower premiums and high deductibles.
different levels of coverage
Okay, stay with me here. I’m almost done with this marathon research on everything related to health insurance. I’ve reviewed the different types of plans, but there’s a bit more before I put an end to all of this.
When it comes to marketplace health care plans, there are four different levels: bronze, silver, gold, and platinum. think of them like medals at the olympic games. (Except when it comes to healthcare, you don’t always want to go for the gold!) These tiers give you different options for how much your plan will actually pay compared to how much you’ll pay yourself. Also note that they do not reflect quality of care.14
Generally speaking, plans with a lower monthly premium will mean a higher deductible and vice versa.
Bronze is a step forward from a catastrophic plan. They give you lower monthly costs, but more out-of-pocket costs.
silver offers lower deductibles and out-of-pocket costs than bronze, but you’ll pay more in monthly premiums. And depending on your income, silver plans also come with discounts called cost-sharing reductions where the provider could cover costs up to the 90% mark.
gold plans have high monthly premiums but low deductibles, coinsurance, and out-of-pocket costs.
Platinum is the highest monthly premium there is, with the lowest out-of-pocket costs. This type of coverage means you’re really putting all your eggs in that one big basket of monthly premiums. But having a lower deductible means your insurance company will start covering those crazy health care expenses much sooner.
how to get the best health insurance
If you want to shop for health insurance on your own, you can visit the websites of the major health insurance companies in your area and see what plans they offer. you can compare plans on your own, though quotes will vary quite a bit.
but let’s be real. this is a lot of work. Choosing the right health insurance plan for you or your family is a daunting task. And you probably have better things to do with your time than scroll through endless health insurance quotes.
That’s why I recommend using our trusted, independent insurance agents for your health insurance needs. They’ll look at your situation and compare the best rates so you can get the coverage you need. They will help you understand the market or even what your employer offers. and the best? they’re free!
Connect with one of our insurance agents today.