Wondering “what is a health insurance premium?” A health insurance premium is the rate you must pay for your health insurance policy. premiums are generally paid monthly, quarterly, or annually during your coverage period. Understanding how the cost of your premium can affect the amount of coverage you receive will help you make an informed decision as you shop for a plan for your family.
Keep reading to learn more about the ins and outs of health insurance premiums.
health insurance premiums vs. out-of-pocket expenses
It’s important to understand how premiums differ from other out-of-pocket health care costs you may face. In addition to paying your premium, you may also be responsible for certain expenses and services you receive through your plan.
Your copayment, or copay, is a fixed amount that you pay in addition to your premium for covered healthcare services including doctor’s visits, specialist visits, or prescription drugs. Once your copay is paid, your health insurance provider covers the remaining cost of the service. The amount of your copay can vary depending on the type of healthcare service.
Your deductible is the amount you owe for covered health care services before your health insurance or plan begins to pay. For example, suppose you have a covered procedure that costs $3,000. your deductible is $1,000. In this scenario, your plan will pay nothing until you have met your $1,000 deductible for this covered procedure. deductible may not apply to all services.
With coinsurance, you and your health insurance company each pay a percentage of your health insurance costs once you meet your deductible. a common example is an 80/20 coinsurance plan. For example, let’s say your health insurance plan’s allowed amount for an office visit is $100 and you’ve met your deductible. Your 20% coinsurance amount would be $20, and the health plan pays the rest of the allowed amount. other common splits include 70/30 and 90/10.
what determines premium rates?
The amount you pay in premiums can be affected by several factors. Even if two people are enrolled in the same health plan, they may still pay different premium rates. Your health and lifestyle may factor into the amount you pay for health insurance.
Factors that may affect your premium rates include:
- Your tobacco use: Those who currently use cigarettes, chew tobacco, or snuff may be at risk of being charged a high premium. you may even have to pay a higher premium if you have recently quit smoking. this is due to the risk of cancer and diseases that result from the frequent use of tobacco products.
- Your age: Generally, the younger you are, the lower your premium will be. Younger people don’t go to the doctor as often and usually don’t have as many health problems as older people.
- Family Size: Depending on whether you are buying health insurance for yourself or your spouse and/or children, you may be charged a higher premium as more people are added to your plan.
- Plan Category: Each Affordable Care Act (ACA) plan category, or metal tier, is designed to pay a different percentage of your health care costs. In general, the higher the metal level, the higher the bonus.
- Your location: Due to factors such as the weather or a lack of healthy food options, Americans living in the same area may have the same health risks as others. Because of this, health insurance companies consider where you live when determining your premium. Insurance providers may only be available in certain areas, so lower premium options may not be available and prices may be higher.
- bronze plans: You can pay the lowest amount in premiums to receive an estimated 60% coverage from your health insurance provider for your health care services. this will leave you paying 40% out of pocket.
- silver plans: You can pay a lower amount in premiums to receive an estimated 70% coverage from your health insurance provider for your health care services. this will let you pay 30% out of pocket.
- Gold Plans: You may pay a higher amount in premiums to receive an estimated 80% coverage from your health insurance provider for your health care services. this will let you pay 20% out of pocket.
- Platinum Plans: You can pay the highest amount in premiums to receive an estimated 90% coverage from your health insurance provider for your health care services. this will let you pay 10% out of pocket.
- You can have the credit paid directly to your health insurance provider to reduce or cover the cost of your premiums.
- You can claim all of the credit you’re eligible for when you file your annual tax return.
- Your annual household income must be between 100% and 400% of the federal poverty line.
- may not be eligible for medicaid, medicare, chip, or tricare.
- cannot access affordable coverage through your employer’s health plan.
- Another person cannot claim you as a dependent.
- Your annual household income must be between 100% and 250% of the federal poverty line.
- must be enrolled in a silver health plan.
- some plans have a one-time copay for visiting the emergency room or staying overnight in the hospital for outpatient surgery. this may be in addition to your deductible and coinsurance. be sure to look for plans with a lower limit on your copay expenses.
- Make sure your medications are included in your plan’s drug formulary. there are plans that do not cover all the drugs members need to stay healthy. It’s important to check that all of your prescription drugs are covered by your plan.
- be sure to look for plans where drug coverage is not subject to the base deductible. lower-value plans tie prescription drug coverage to a deductible, which leaves you with lots of extra costs.
- It is important to stay within your plan’s network of providers. your insurance company has negotiated lower rates with doctors, specialists, and hospitals. By staying in-network, your plan saves you money with these pre-negotiated rates.
metal tiers determine your premiums and coverage for the plans here
To be clear about what you can control, you can choose how much you pay in premiums based on your selection (the plan’s level of coverage) or the “metal metal level” , if you’re considering ACA-qualified health insurance plans.
Basically, if you’re willing to pay a higher premium, you can expect to pay lower out-of-pocket costs when you go for medical care (and if you want to pay less in premiums, you can expect to pay more out-of-pocket).
There are four levels of coverage that people may enroll in:
There are also catastrophic plans that primarily benefit healthy people under the age of 30 who want coverage in the event of a major and unexpected medical problem. these plans have the lowest premiums available, even lower than a bronze plan. But this low premium carries a risk. could face an $8,700 deductible starting in 2022 for one person.1
With ACA, people with a catastrophic plan can still receive the same covered preventive care services and essential health benefits as people who enroll in a metal level plan.
If you are concerned about your ability to pay your premiums, you may qualify for government subsidies.
reduce your health insurance premiums here with a subsidy
Obamacare health insurance” width=”300″ height=”200″ />The Premium Tax Credit is a subsidy that helps lower or cover the cost of premiums for families making a modest income and who are enrolled in ACA health insurance plans. You can receive this credit in one of two ways:
To be eligible for the premium tax credit, you must meet these requirements:
Cost-Sharing Reduction is another subsidy that helps reduce or cover your out-of-pocket costs when you get health care. this means that your health insurance provider will cover more than your deductible, copay, or coinsurance when you go to the doctor, specialist, or hospital.
To be eligible for this cost-sharing reduction, you must meet these requirements:
check more than premiums before signing up for health insurance
While it’s important to know what your premium will be when shopping for health insurance, that’s not all you need to consider. You need to understand why your premium rate is set at a particular amount and how much coverage you will receive from your plan.
healthmarkets can help you understand many aspects of your health insurance plan before you apply. In addition to knowing your premiums, HealthMarkets can help you break down even the darkest parts of a health plan, including:
apply for health insurance with healthmarkets
To learn more about why you need health insurance, your health insurance options, or to better understand what a health insurance premium is, contact healthmarkets today.
Start reviewing your options online now or call to speak with a licensed insurance agent.