Think of your premium like a subscription fee. Just like you pay monthly for streaming services or a gym membership, you pay a premium to have insurance coverage available when you need it. You owe this amount whether or not you use any medical services.
How Premiums Work
Every month, you pay your premium to maintain your insurance coverage. In return, your insurance company agrees to help pay for covered medical services according to your plan terms.
- You pay your premium each month (or have it deducted from your paycheck)
- Your coverage stays active as long as premiums are paid
- If you miss payments, your coverage can be cancelled
- Premiums typically change once per year at renewal
Marcus pays $450/month for his health insurance premium. That's $5,400 per year just to have coverage. In a healthy year where he only gets a checkup, he still pays $5,400. But when he needs emergency surgery costing $45,000, he only pays his $2,000 deductible plus coinsurance. His total out-of-pocket is about $6,000 instead of $45,000.
What Affects Your Premium Cost?
Under the Affordable Care Act (ACA), insurance companies can only use these factors to set your premium:
Age
Older adults typically pay more because they tend to use more healthcare services. A 60-year-old can be charged up to 3 times more than a 21-year-old for the same plan.
Location
Premiums vary by region based on local healthcare costs, competition among insurers, and state regulations.
Tobacco Use
Smokers can be charged up to 50% more than non-smokers in most states.
Plan Category
Plans with lower deductibles and better coverage (Gold, Platinum) have higher premiums than high-deductible plans (Bronze).
Number of People Covered
Family plans cost more than individual coverage. You pay for each person on the plan.
Don't just look at the premium when comparing plans. A plan with a $200/month premium and $6,000 deductible might cost you more overall than a $400/month premium with a $1,500 deductible, especially if you need regular care. Calculate your total potential costs for the year.
Premium vs. Deductible: The Tradeoff
There's typically an inverse relationship between premiums and deductibles:
- Higher premium = Lower deductible: You pay more monthly, but less when you need care
- Lower premium = Higher deductible: You save monthly, but pay more out-of-pocket for care
Choose a Higher Premium Plan If:
- You have ongoing health conditions requiring regular treatment
- You take expensive prescription medications
- You're planning a pregnancy or surgery
- You prefer predictable monthly costs
Choose a Lower Premium Plan If:
- You're generally healthy and rarely see doctors
- You have savings to cover a high deductible if needed
- You want to minimize monthly expenses
- You're eligible for a Health Savings Account (HSA)
Ways to Lower Your Premium
- Check for subsidies: If you buy through the Marketplace, you may qualify for premium tax credits
- Choose a higher deductible plan: Accept more risk in exchange for lower monthly costs
- Use an HSA-eligible plan: High-deductible plans let you save pre-tax dollars
- Quit tobacco: Non-smokers pay significantly less
- Compare plans annually: Rates change yearly, so shop around during Open Enrollment
Want to Find the Best Premium for Your Budget?
Our licensed agents can compare plans and help you find the right balance between premium cost and coverage.
Get Free GuidanceFrequently Asked Questions
What happens if I don't pay my premium?
If you miss premium payments, you typically have a grace period (usually 30-90 days depending on your plan type) to catch up. After that, your coverage will be terminated. You may not be able to get new coverage until the next Open Enrollment period unless you qualify for a Special Enrollment Period.
Is my premium the only cost I pay for health insurance?
No. In addition to your premium, you may also pay deductibles, copays, and coinsurance when you receive care. Your premium just keeps your coverage active; it doesn't cover the cost of actual medical services.
Can my premium change during the year?
Generally, your premium stays the same for the plan year. However, it can change if you add or remove family members, move to a new area, or experience certain life changes. Premiums are recalculated each year at renewal.
Do employer-sponsored plans work the same way?
Yes, but your employer typically pays a portion of the premium. You'll see your share deducted from your paycheck, often pre-tax. Employer contributions make this coverage usually cheaper than individual plans.