Health Insurance Premiums: Understanding The Basics

Health insurance has so much jargon, and it’s easy to get confused with terms like premium, deductible, and coverage being thrown around.

Here at Enhance Health, we want to equip you with tools to understand your health insurance and provide expert advice so that you can choose the best plan for your needs and budget. 

So let’s break down what a health insurance premium is and how to keep yours low. 

What Is A Health Insurance Premium?

A health insurance premium is the monthly amount you pay for your insurance plan. Different plans have different monthly premiums connected to your plan’s coverage range.

Your premium is the basic cost for your plan, and you pay it every month whether or not you use your insurance during that month. To keep your plan, you must pay regularly each month.

It’s important not to mix up your premium and your deductible. Your deductible is how much you pay for healthcare services out of pocket before your insurance kicks in. 

Your premium and deductible are often inversely proportional, meaning that if one is high, the other is often low. One is not necessarily better than the other, as some benefit from a low premium and a high deductible. In contrast, others are better off with a higher premium and a lower deductible.

Factors That Affect Health Insurance Premiums

Let’s look at the factors that impact the cost of your insurance premiums. 

Your Health

Under the ACA, insurance companies can no longer use your medical history or pre-existing conditions to determine your premiums. This also resolved the issue of insurance companies denying coverage because of a pre-existing condition.  

All qualified ACA-compliant plans will cover pre-existing conditions without increased premiums. However, non-ACA-compliant health insurance plans are available that limit coverage in ways that plans on the ACA marketplace do not. 

If you have a permanent disability that qualifies you for Social Security grants, you may have access to Medicare. 

Your Lifestyle

Insurance companies can’t generally adjust premiums based on lifestyle choices, like how much exercise you get. However, smoking is one lifestyle factor that can hugely impact your premium. 

The ACA allows for up to 50% higher premiums for smokers as opposed to non-smokers. Because smoking increases your risk of several health concerns, you are likely to require greater medical care in the future and, therefore, can be charged higher premiums.

Your Age

Your premiums can increase from age 21, with a maximum premium of three times the rate of a 21-year-old. 

Increases are set up in various bands that allow for gradual increases proportional to age. However, if you are in Massachusetts, the cap is two times the premium of a 21-year-old. 

Another age-related factor affecting your health insurance is whether you are over 65 and qualify for Medicare. If you are, you need to look at the available Medicare plans

Signing up for Medicare when you become eligible at 65 is essential to avoid paying the late enrollment penalty that increases your premiums. 

Your Location

Different zip codes have different premiums, and states have different rules about how premiums are structured. For example, New York and Vermont do not allow adjusted premiums based on age, whereas other states do. 

We’ve put together a list of average costs for health insurance by state to show you what you can expect to pay when comparing your options. 

Your Family Size

The size of your family impacts your premiums, as each family member has their own premium. This means that each child you have will have their own monthly health insurance premium. 

However, this only applies to up to three children under 21. This means that your family premium stops increasing after three children, so you would pay the same amount for three or more children, assuming all other factors remain constant.

Your Job

Your job significantly impacts your health insurance premiums, as many Americans have health insurance provided through an employer-sponsored program. This is often private insurance, and costs are capped, making it a good option for some people.

However, if your job doesn’t provide health insurance, the coverage doesn’t meet your needs, or you lose your job and need health insurance, many options are available. 

If you are in a household with little to no income, you can look into Medicaid, a federal low-cost program designed to help those who can’t afford other insurance.

Health Insurance Premium Cost Structure

Your premium will be structured around different factors limiting how you access care and how high your out-of-pocket costs are. It’s important to note that a lower-cost plan, like a Bronze tier plan, does not provide lower-quality care.

Instead, It will limit the providers you can see and what costs your insurance covers. Generally, premiums and deductibles are indirectly proportional, meaning that increasing one typically decreases the other.

Types Of Health Insurance Plans

There are a few different types of plans with varying premium structures.

  • Health Maintenance Organization (HMO) has the lowest premium but restricts you to one primary care physician who must refer you to other specialists on the insurance network.
  • Exclusive Provider Organization (EPO) allows you to see specialists without referrals, but you are still limited to the set network contracted by your insurance company. The premium will be more expensive than an HMO.
  • Preferred Provider Organization (PPO) has more flexibility, and you can use your preferred provider for a higher premium. However, out-of-network doctors and specialists will be more expensive than in-network ones. 
  • Point Of Service (POS) is a hybrid of HMO and PPO plans. You have an in-network primary care physician who provides referrals, but you can opt to see out-of-network providers for higher out-of-pocket costs. 
  • Catastrophic Health Insurance plans are designed to cover medical emergencies rather than day-to-day care. If you are young and reasonably healthy, this is an option to consider. They typically have a very high deductible and low premiums. 

How Do I Pay My Health Insurance Premium?

Knowing how to pay your health insurance premium is important because it can be confusing. Regardless of your plan, you need to pay your insurance company directly. If you enrolled through the Marketplace, log in and find the payment link for your insurance company.

If you are enrolled through a broker, you can ask them how to pay your insurance company directly. This is especially helpful if your insurance company does not have an online payment system. Your broker can help you with the payment process and avoid any penalties. 

How Can I Find Affordable Health Insurance Premiums?

You can use Enhance Health to compare different plans for affordable health insurance plans. You’ll be paired with an insurance consultant who will listen to your situation and help you find a plan with affordable premiums that give you the coverage you need.

8 Tips To Reduce Your Health Insurance Premium

Healthcare costs are on the rise so finding ways to manage and reduce expenses has become vital. With health insurance premiums often representing a substantial portion of household budgets, understanding how to optimize your health insurance coverage while minimizing costs is crucial. 

Here are some tips to help you maintain a comprehensive yet affordable health insurance plan. 

1. Purchase As Early As Possible

Age is a significant factor in determining health insurance premiums, as older people are more likely to need chronic medical care. Age-related diseases mean that older people pose more of an insurance risk.

Even the difference between taking out a policy at 59 and 60 can be significant. But the earlier you start, the lower your premiums will be. 

Your premiums can start to increase after 21, with your health insurance costing up to three times more at 60 than at 21. 

2. Choose The Right Plan

So many different plans are available that it’s hard to work out which is the best for you. That’s why consulting the professionals at Enhance Health is a smart move.

Marketplace plans are categorized as bronze, silver, gold, and platinum. Bronze plans will have the lowest premiums but higher deductibles and premiums. Platinum plans will have a higher premium but a lower out-of-pocket cost.

You want a plan that covers your needs without excessive copayments or coinsurance. But you also don’t want to pay for coverage you don’t need.

This is where our knowledgeable insurance brokers can help you make the best choice for you. Enhance Health is dedicated to matching you with a health insurance plan that suits your needs and your budget.

3. Participate In Preventative Care

Using your preventative care benefits is an excellent way to look after your health, thereby decreasing how much additional coverage you need and making plans with lower premiums a more sensible choice.

Preventative care benefits are available on all marketplace plans without a copayment or coinsurance. You will not have to pay for these services even if you have not met your deductible.

They include screenings for a range of diseases like high blood pressure, diabetes, and depression. They also include alcohol misuse counseling and smoking cessation support. 

4. Look Into Tax Deductions

There are a range of tax deductions available for health insurance costs. There are also premium tax credits, a feature of the ACA to try and make your healthcare more affordable. 

If your income falls into a range of 100-400% of the federal poverty level, you may qualify for this subsidy that offsets some of your monthly premium. 

5. Lead A Healthy Lifestyle

While the ACA ensures that your lifestyle can’t directly impact your premiums, leading an unhealthy lifestyle will likely result in more medical expenses in the short and long term. 

By leading a healthy lifestyle, you can decrease your overall medical costs and choose a plan with a lower monthly premium.

6. Stop Smoking

Smoking is one of the worst things you can do for your health insurance premiums. Being a regular tobacco user can increase your premium by up to 50%. An excellent way to reduce our premium is to stop smoking.

Not only is this good for your premium, but it is also a massive help to your health. It will save you money on your premiums but also save you money on healthcare in the long run from smoking-related complications. 

7. Enroll In A Health Savings Account (HSA)

Another way to reduce your health insurance premiums is to opt for a high-deductible plan and use a health savings account (HSA) to cover some of those costs. 

An HSA is a savings account that you can only use for health expenses and only qualify for if you have a high-deductible insurance plan.

Because high-deductible plans usually have lower premiums, this is a great way to save on monthly premiums, especially if you don’t have significant health issues requiring care.

8. Conduct An Annual Review

Once you’ve chosen the best plan, it might be tempting to forget about it. But your needs change over time, and the best plan now might not be the best one in five years. So, conduct an annual review to see if another plan fits your needs better.

Paying Health Insurance Premiums On Time 

Your premiums are a monthly expense with a regular due date. If you fail to pay, there is a grace period afterward where you can catch up on your payments, which is usually three months but may vary.

If you don’t pay your premiums by your grace period, your insurance plan could end. And if your coverage ends because of non-payment, you will have to wait until the next open enrollment period to get new insurance. The open enrollment period is November 1 to January 15 every year.

If you struggle to pay your monthly premiums, talk to an Enhance Health broker about finding a health insurance plan with premiums as low as $0.

Conclusion

If you are worried about the cost of your premiums, remember that the costs of a medical emergency will be far higher if you don’t have insurance. 

Health insurance premiums don’t have to break the bank when you partner with Enhance Health to find the best affordable insurance for you. Contact Enhance Health today to start saving on your health insurance premium. 

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