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What is a health insurance premium?

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By | Updated on Jul. 31, 2020 Medically reviewed by Scott Dershowitz, LMSW, CMC
Health Insurance Premium

Key takeaways

  • A health insurance premium is a monthly fee paid for health coverage, with additional costs like coinsurance, copayment, and deductible.

  • The cost of health insurance premiums depends on factors including location, age, tobacco use, family size, company size, and plan type, but not on gender or pre-existing conditions.

  • Failing to pay premiums can lead to coverage lapse, but options like plan switching, higher deductible plans, tax subsidies, or Medicare Savings Programs can help manage costs.

  • Prescription costs can be mitigated with drug discount cards like SingleCare, which offer savings even if the medication isn’t covered by insurance.

A health insurance premium is a fee you pay, usually monthly, for your health coverage. Much like club membership dues, you have to pay the premium to access your health insurance, and you still get charged even if you don’t use the insurance. There are other costs associated with your health insurance, too, including a coinsurance, copayment, and deductible. 

If you bought your health insurance policy on your own (for example, through the Affordable Care Act, or ACA, health insurance marketplace), you pay the premium to your health insurance company. If you receive health insurance from your employer, you may have your portion of the premium (i.e., whatever your employer doesn’t pay) deducted from your paycheck.

How much is a health insurance premium?

According to the Kaiser Family Foundation, the average annual cost of health insurance premiums for a single person in 2019 was $7,188 and $20,576 for a family. That’s a 4% and 5% increase, respectively, over 2018 figures.

The cost of your health insurance premium will depend on a number of factors, says the federal government’s healthcare.gov. They include:

  1. Where you live. No big surprise here, but those who live in areas of the country where the cost of living is high can expect to pay higher health care costs, including health insurance costs.
  2. Age. Because they tend to have fewer health problems than older adults, young people generally make less use of medical services and therefore are generally charged lower premiums. (Not applicable for employer-sponsored plans.)
  3. Tobacco use. People who use tobacco products can be charged up to 50% more for their health insurance than those who don’t use them. (Not applicable for employer-sponsored plans.)
  4. Single vs. family plan. A family plan covers two or more family members. Adding a spouse and/or children to a health plan will increase the monthly premium. Enrollees are charged for each person covered by the plan.
  5. Size of company. For employer-sponsored plans, the size of the company you work for could indicate whether they have a higher or lower premium.
  6. Type of plan. There are generally five types of health insurance plans through the ACA marketplace: bronze, silver, gold, platinum, and catastrophic. In most cases, the higher your premium with one of these plans, the lower your deductible will be—and vice versa. 

Two things that shouldn’t raise your premium costs are your sex and a pre-existing health condition. For new, ACA-compliant plans, it’s illegal for an insurance provider to charge men and women different prices for the same plan. They also can’t charge you more for a plan because you have or may have had a condition such as diabetes or cancer. The only exception this would be grandfathered plans, which predate the ACA.

What happens if I stop paying my health insurance premium?

High health insurance costs can give even the financially well-off pause. And sometimes it’s hard to rationalize the need for something you might theoretically use (health insurance) versus the need for something immediate—like food and rent money.

But if you stop paying your health insurance premium, your coverage could lapse. That means you can’t access your healthcare coverage for things like doctor visits or admission to the hospital. If you’re getting your healthcare coverage through the health insurance marketplace, you may be given a grace period, usually 90 days, before your coverage expires. It’s important to pay all your missed premiums during that grace period or your health insurance coverage may be terminated and you could have to wait for the next open enrollment period to sign back up. (However, there are a few criteria to trigger a special enrollment period, such as having a baby or changing jobs.)

If you’re having trouble making premium payments, you have options—although you may have to wait until the next open enrollment period to make any changes. Some ideas to consider?

  • Switching plans. If you have a PPO, which pretty much allows you to see any doctor anywhere without a referral, you’ll pay a higher premium than if you have an HMO. With an HMO, your primary care physician coordinates all your medical care and you can only see another doctor with a referral or if you have an emergency. 
  • Going with a higher deductible plan. A deductible is the amount of money you must pay out of pocket for healthcare services before your health insurance starts picking up the tab. In general, plans with higher deductibles tend to charge lower premiums. 
  • Getting a tax subsidy. If you buy your own insurance on the health insurance marketplace, you may qualify for the federal government’s Advanced Premium Tax Credit. You’ll have to meet certain criteria, however, including not being eligible for Medicaid or Medicare.
  • Medicare Savings Program. If you have Medicare and are having trouble paying for your monthly premium, you might qualify for a Medicare Savings Program. Medicare beneficiaries can contact their local department of social services (aka, the “Medicaid office”) to learn more. 

RELATED: 11 medical expense deductions you can claim

How to save on prescriptions with a high-premium health plan

Whether your health insurance carries a high deductible or a high premium, you’re probably spending a lot of money for healthcare coverage. 

And then there’s the cost of prescription drugs. 

In some cases, you’ll pay a copay for a drug. There are several tiers of copay depending on the drug. In other cases, the drug won’t be covered by insurance at all (or maybe you don’t have insurance) and you’ll have to foot the total cost of the medication yourself.

Regardless, it pays (pun intended!) to check out drug discount cards like SingleCare. You might be able to get the drug for less money than your copay or at a significant reduction if you don’t have—or the drug isn’t covered—by insurance. SingleCare can save you up to 80% on your prescriptions. All you have to do is:

  1. Look up your prescription at singlecare.com.
  2. Download (or text or email) yourself a SingleCare discount card.
  3. Show your coupon card to the pharmacist when you drop off your prescription. 

It’s easy, free, and SingleCare drug discount cards can be used for the entire family at over 35,000 pharmacies around the country.