How Much Does Health Insurance Cost?

Cathy Jakicic
June 14th, 2019 May 7th, 2019 |
Read time: 8 minutes
Sunset over a dock and lake

How much does health insurance cost and why is it so expensive?  It’s a simple question without a simple answer. When we think about the cost of health insurance, there are two types of “costs” that matter to you.

One is your monthly premium. This amount is paid to your insurance company in order to maintain your policy. You pay the same amount each month regardless of whether or not you use your benefits.

The other “cost” is the out-of-pocket amount you pay when you want to use your plan’s benefits for a covered medical service. These costs typically include your deductible, coinsurance and copay.

We’re going to include both premiums and deductibles in our discussion of health insurance costs here. You can also learn more about copay, coinsurance and deductibles.

  • Premium: Your monthly insurance payment to retain coverage.
  • Deductible: A fixed dollar amount you must pay before your health plan’s benefits take effect.

Most of us think about the cost of our insurance in terms of our monthly premium amounts, but you’re responsible for both your premium and your deductible if you want to maintain and use your health insurance, so it’s important to factor in both numbers when you’re considering the overall cost of health insurance.

Monthly Premiums are on the Rise

Monthly premiums for health insurance have increased each year prior to, and since, the ACA took effect except for 2018 to 2019. According to the Kaiser Family Fund:

Year Second Lowest Cost Individual Silver Plan Premium1 Average Annual Employer Health Plan Premiums (Individual) Average Annual Employer Health Plan Premiums (Family)
2014 $273 $6,0252 $16,8343
2015 $276 $6,2514 $17,5455
2016 $299 $6,4356 $18,1427
2017 $359 $6,6908 $18,7649
2018 $481 $6,89610 $19,61611
2019 $477 Not Available Not Available

Also, according to a 2017 Department of Health and Human Services (HHS) between 2013 – the year before many of the ACA’s provisions took effect — and 2017 premiums doubled for individual health insurance plans.12

Why Are Monthly Health Insurance Premiums So Expensive?

Health insurance prices have continued their upward climb for many reasons. One reason is that the ACA has put an additional 20 million people in the insurance pool and made it illegal for insurance companies to deny coverage because of pre-existing conditions.13

That means healthcare insurers are required to cover the expenses of some of the more costly patients within the healthcare delivery system, for example, those with one or more pre-existing or chronic conditions.

Prior to the ACA, underwriting practices placed those without pre-existing conditions and those with pre-existing conditions into separate pools (aka “risk groups”), with one group enjoying lower premiums because they were “healthier” (and thus, a lower risk for the insurance company having to pay a claim).14

Individuals with serious chronic conditions often couldn’t obtain coverage at all because they were considered a high risk. And those somewhere in between paid higher premiums and/or deductibles, or had certain benefits excluded from their policies but they could still obtain a policy.

Now, because pre-existing conditions must be covered by ACA-qualifying plans, it means that all of those individuals are in the same general pool and are no longer differentiated by risk.

Naturally, that means that younger, healthier people may be paying a little more for their coverage than they otherwise would if the old risk pools were being used. And older, sicker people may be paying a little less for their coverage than they otherwise would.15

Additionally, the ACA has required health plans to fully cover preventive services such as cancer screenings and immunizations.

Your specific healthcare premium is also affected by a range of more personal factors, including:

Age: The base rate for a healthcare plan is usually calculated for a 21-year-old policyholder. Rates go up as you get older, with the largest increases coming after age 50.16  Premiums for a 64-year old can be triple what they are for a 21-year-old.

Location: Where you live impacts your premiums. Differences in competition, state and local rules and the local cost of living can affect your bill. For instance, the average monthly premium for a silver plan is $411 in Hawaii and $415 in Idaho.17 On the other end of the scale Alaskans pay $780 for a silver plan and in Wyoming it’s $662.18

Tobacco use: Insurers can charge tobacco users up to 50% more.19

Individual vs. family enrollment: Insurers can charge more for a plan that also covers a spouse and/or dependents.

Plan category: The five plan categories – Bronze, Silver, Gold, Platinum, and Catastrophic — are based on how you and the plan share costs. Bronze plans usually have lower monthly premiums and higher out-of-pocket costs (like deductible, copay and coinsurance). Platinum plans usually have the highest premiums and lowest out-of-pocket costs

Individual states’ mandates can also affect premiums. For instance, some states mandate coverage for chiropractors, but the number of allowed visits may vary from state to state. The impact on premiums may be greater in a state with a more generous benefit.20

While all plans in the Marketplace cover the same essential health benefits, some insurance companies may offer more benefits. This can also affect your costs.21

The following factors cannot impact your major medical premium according to the ACA:

  • Current health status
  • Pre-existing conditions
  • Medical history
  • Gender

Health Insurance Deductibles Are Also Increasing

High-deductible health plans are becoming more common as a way for insurers (and employers offering group health benefits) to try to keep monthly premiums in check. You’re still paying the costs, it’s just as a deductible in the event you need to use your benefits instead of as a monthly premium.22

This is the case with both employer-provided group health plans and individual plans, with average employer health plan annual deductibles for an individual shown below:

Year Average Individual Annual Deductible for Employer Health Plan
2014 $1,21723
2015 $1,31824
2016 $1,47825
2017 $1,50526
2018 $1,57327

You May Be Able to Lower Your Health Insurance Premiums

Are your monthly premiums too high? Do you feel like you’re not getting the best value from your medical coverage? If so, what can you do about it?

None of us is getting any younger and few of us want to move (or jettison a few family members) just to change how much our health insurance costs. But there may be some things you can do to trim your premiums.

See if you qualify for a free health insurance program like Medicaid, or the Children’s Health Insurance Program (CHIP).

Consider increasing your deductible. The more you pay out of pocket — whether you have a group or individual plan — the less you will have to pay in premiums. You can sometimes pair a higher deductible plan with a health savings account (HSA).

Pre-tax contributions can be rolled into your plan each year. You pay healthcare expenses from your HSA until it’s exhausted.

If you need help with a high-deductible health plan, medical gap insurance may be able to help. This is a form of supplemental health insurance that provides lump sum coverage for a range of covered injuries and illnesses.

Find out how much a gap health plan will cost you each month by getting a free quote – it just takes a minute.

Get a Free Gap Insurance Quote

Try switching to an in-network doctor. It can be hard to switch from a physician you’re comfortable with, but it’s worth a look into your plan’s provider network to avoid out-of-network charges.

Stop using tobacco. If you’re a smoker, saving on your health premiums is just one of the excellent reasons to try to quit. Remember, the ACA allows insurance companies to charge smokers up to 50% higher premiums.28

See if you qualify for a health insurance subsidy. The caveat here is that you can only enroll in ACA-qualifying major medical plans that are eligible for subsidies during the annual open enrollment period or if you qualify for a special enrollment period. If either of these applies to you, you may qualify for a subsidy for your monthly health insurance premiums.

Find out if you could qualify for an ACA subsidy.

ACA Subsidy Calculator

Consider a non-ACA qualifying health insurance option. First, it’s important to remember that major medical insurance is the most complete and comprehensive health coverage available.

You should have a major medical policy if you can afford it. That said, if you don’t qualify for a subsidy or special enrollment period, short-term medical can help with unexpected medical bills and the premiums tend to be lower than major medical plans.

Short term health insurance provides less coverage than ACA-compliant plans, which usually means that premiums for short term medical insurance are significantly lower than premiums for an ACA-compliant plan. However, premiums for short term health insurance will vary depending on the benefits you select.

Short-term medical plans are highly customizable and provide coverage in the event of an unexpected injury or illness. These plans tend to include some amount of coverage for things like hospital room and board, emergency room care, ambulance and surgical services and diagnostics. However these short-term medical plans do not cover pre-existing conditions.

Find out how much a short term insurance plan could cost you by getting a quote. It just takes a minute.

Get a Short Term Insurance Quote Now

Summary + next steps

Your health insurance costs are affected by a range of factors and it’s important to know which ones you can control and how to get the most from your health insurance.

For most of us, healthcare costs make up 8% of our income,29 so it’s a smart investment of time to:

Learn more about the health insurance solutions included above:

Or, contact a licensed agent for help at 866-278-1464.

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Originally Published On May 7th, 2019
Independence American Insurance Company, Madison National Life Insurance Company, Inc. and/or Standard Security Life Insurance Company of New York may underwrite the products referenced on this website. Legal Disclaimers.

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