The cost of your health insurance per month may depend on factors such as your age, the number of people you’re insuring, and the type of coverage that you need.
Whether you’re single or have a family that depends on you, it’s of great importance to have a budget. With a budget, you’ll know what you’re expected to spend every month on rent, utilities, groceries, credit card bills, car expenses, health insurance, and many more. While most of these expenses are easy to estimate and budget for, the cost of your health insurance per month can be a bit trickier because there are various factors involved.
The monthly average health insurance cost in 2020 is $456 for an individual and $1,152 for a family. These costs may, however, vary depending on your location and the type of health plan that you choose. It’s, therefore, important to understand the relationship between health coverage and cost to help you select the right health insurance for you.
In this brief article, we’ll take a look at various factors revolving around healthcare premiums so that you can easily determine the cost of your health insurance per month.
What exactly is Individual Health Insurance?
Many people in the United States, especially employees get their health insurance through a group plan either sponsored by a union or their employers. There are also many other people who buy health insurance for themselves. If you’re not buying any group plan and buying your own health insurance, this is known as an individual health insurance plan.
It doesn’t matter whether you’re single or include your family members on this plan, it’s known as an individual health insurance plan. Thanks to the Affordable Care Act (ACA), which is widely known as Obamacare, you can either purchase the individual health insurance plan through a marketplace (private insurers) or government exchange (ACA plans).
When looking for individual health insurance, the ACA plans can be a great place to start. They generally cover essential benefits and coverage including preventive care, outpatient, hospitalization, lab tests, prescription drugs, maternity and child services, mental health treatment, and rehabilitation.
You should keep in mind that each insurer that offers ACA plans must comply with the regulations set forth in the ACA. However, each insurer can decide how it provides these benefits depending on levels and additional benefits. It’s, therefore, essential to know the best level of coverage and the cost of the plan that you’ll pay per month.
Factors that Determine Health Insurance Costs
Here are the factors that determine health insurance costs.
Age
Some states such as Vermont and New York do not use age to determine health insurance costs. However, age is one of the major contributing factors that most states use to determine health insurance costs. In most states, the base age is 21 and the premium can be adjusted upwards for those in their 30s, 40s, 50s, and 60s.
You have to keep in mind that you’ll pay higher premiums if you’re aged 50 or older. In short, the premium rates for older people are up to three times higher than for younger people.
Location
Your location may also affect the costs of the health insurance but this generally depends on the amount or lack of competition in a given area or region. You have to keep in mind that competition is generally intense in cities or populated areas while there may be one or two insurance companies in rural parts of the country.
As such, the premiums can be much higher for those in rural areas due to lack of competition and a bit lower in urban areas due to intense competition.
Tobacco
Using tobacco will affect how much health insurance costs you pay per month. Most insurance companies will charge smokers about 50% more than they charge those who do not use tobacco. Some states also do not allow insurance companies to charge tobacco smokers up to a given limit, though the use of tobacco may still affect the cost of health insurance that you pay per month.
Plan Category
Your health insurance cost per month may also be affected by the plan that you choose. Most insurance companies break their plans in terms of metal levels: Bronze, Silver, Gold, Platinum, and Catastrophic. Each level offers different premiums as well as various benefits.
Gender and Marital Status
The individual health insurance cost that you pay per month may also depend on your gender and marital status. Needless to say, your health insurance cost will be much lower per month ($456) if you’re single and a little higher ($1,152) if you have a family.
Again, a young single male can pay premiums as low as $100 or upwards of $300 depending on the level of coverage. This is because young single males are categorized among the lowest-risk group in health insurance.
On the other hand, women can pay much higher premiums than men. This is based on factors such as the health costs related to having children, which men don’t have to worry about.
Deductibles and Cost-sharing Expenses
Deductibles and cost-sharing expenses (copayments and coinsurance) can also affect your monthly health insurance costs. Deductibles are the amount that you pay for health care services annually before your insurer pays its portion of the cost of covered services.
The average annual deductible for an individual is $4,364 and $8,439 for family coverage in 2020. You should keep in mind that deductibles for individual health insurance plans may vary greatly with some being as low as zero.
On the other hand, copayments and coinsurance are cost-sharing expenses that you’re expected to pay every time you get a medical service after reaching your annual deductible. Let’s go into details.
Copayment – This is a fixed amount that you should pay for the covered health care services. Here’s an example. If your plan has a copayment of $50 and the cost of visiting your doctor is $200.
- You’ll pay $200 at the time you visit the doctor if your deductible threshold isn’t met
- You’ll pay your $50 copayment if your deductible threshold is met
Coinsurance – This is the percentage of covered health care service that you’re expected to pay after you’ve met your deductible. Let’s assume that your insurance plan has a 30% coinsurance and your doctor’s visit is $200.
- You’ll pay $200 for the doctor’s visit if your deductible is pending
- You’ll pay 30% of $200 (which is $60) if your deductibles threshold is met
Maximum Out-of-pocket Limits
Simply put, the maximum out-of-pocket limit is the maximum amount of money that you have to spend for covered services in a year. It is essentially a financial safety net to ensure that the insurance company pays 100% for covered services for the rest of the benefit year after you reach the maximum out-of-pocket limits. Your deductibles, coinsurance, and copayments also count towards your annual maximum out-of-pocket limit.
For 2020, the average out-of-pocket limit for any ACA plan cannot exceed $16,300 for family coverage and $8,150 for individual coverage even though many insurance plans offer much lower out-of-pocket limits.
To this end, you should keep in mind that deductibles, cost-sharing expenses (coinsurance and copayment), and maximum out-of-pocket can significantly affect your health insurance cost.
For example, paying higher deductibles, higher cost-sharing expenses, and higher maximum out-of-pocket limits can significantly lower your health insurance costs. On the other hand, lower deductibles, lower cost-sharing expenses, and lower out-of-pocket limits can increase your health insurance costs.
How to Find an Affordable Health Insurance Plan
The best thing to do if you’re looking for an affordable health insurance plan is to choose a health insurance category that suits your budget. As we noted earlier, most insurance companies over various levels of coverage including Bronze, Silver, Gold, Platinum, and Catastrophic. According to statistics from eHealth, more than 75% of individuals chose Bronze and Silver plans because they’re the most affordable.
So whether you are choosing your health insurance plan as an individual, for your family, or through your employer, it’s important to find the best plan for you and your family at an affordable cost.
