The average individual in America pays $452 per month for marketplace health insurance.1 But costs for health insurance coverage vary widely based on many factors.
Maybe you just turned 26 and are off your parents’ plan (#adulting?). Or maybe you’re facing a job loss and need to replace your former employer’s coverage. Or you’re just looking for other options besides your employer’s plan. No matter your situation, you’re wondering: How much does health insurance cost?
Everyone knows health insurance is expensive. It can pretty quickly suck the life out of your monthly budget. But just how expensive is it? And why is it so costly? Are there ways you can pay less?
Well, you’re in the right place! We’ll walk you through everything you need to know about health insurance costs, what all those terms mean and what factors make up that hefty price tag.
Basic Health Insurance Terms
If you’re just learning the ins and outs of health insurance, we feel your pain. Health insurance is complicated stuff—like rocket-science complicated. You might not even know where to start. (And if you’re wondering if health insurance is something you even need, start here.)
Do you have the right health insurance coverage? Connect with a Trusted pro today.
Before we look at how much health insurance costs, let’s break down some terms into plain English.
First, there are only two main kinds of health insurance—private and public.
Private coverage is health insurance through your employer, union or even the armed forces. You can also get it on your own through the government’s marketplace—Healthcare.gov. (Quick history lesson: The marketplace, or exchange, was created in 2014 after the passage of the Affordable Care Act, or “Obamacare.” It provides access to around 175 insurance companies. In 2021, open enrollment was extended until August 15.)
Public insurance is provided by the government. It includes Medicare (for those 65 years or older), Medicaid (for low-income families) or care from the Department of Veterans Affairs.
Your premium is the amount you pay monthly (sometimes annually) for your coverage.
The deductible is the amount you have to fork over before your insurance company starts chipping in.
Your maximum out-of-pocket costs are the limit to what you will pay in a year. For example, if your plan’s maximum out-of-pocket costs are $8,000, once you pay that amount, your insurance company will cover everything above that through the rest of the year. It acts as a financial safety net so you don’t totally break the bank from medical costs.
What Is Individual Health Insurance?
Individual health insurance is just another term for private coverage as opposed to a group plan (like those offered by an employer). It’s simply the kind you get on your own, even if you’re including family members on your plan.
You might be looking for individual health insurance for a couple different reasons. If your employer doesn’t offer it, if it’s too expensive or if you’re retiring before the age of 65. You’ll also need it if you work part time, you’re unemployed or self-employed.
Plans offered in the marketplace are also examples of individual health insurance.
Now . . . let’s dig into the numbers.
What Is the Average Cost of Health Insurance?
Maybe you’re wondering, How much does individual health insurance cost? Here’s what you can expect. The average individual in America pays $452 per month for marketplace health insurance in 2021.2 The average family pays $1,779 per month.3
But the cost of health insurance varies widely based on a bunch of factors. Some things are in your control, some aren’t. Things like your age, how many people are on your plan, how much coverage you need, where you live and who your employer is all play a role in the price of your coverage.
Here’s a breakdown showing the average costs depending on your state:
Is Employer Coverage Cheaper?
Many people assume that employer coverage is the best or cheapest option. In 2020 an estimated 157 million people opted for their employer-based health care plan.4
But is it? Should you always choose your employer’s health coverage or should you opt for individual health insurance?
Employer plans can sometimes be less expensive since the company chips in part of the costs. Your employer can also sometimes get a better rate because they’re buying a large block of insurance packages. But not always. It can sometimes be cheaper to get health insurance on your own. While it might take a little more work on your end, if you’re looking to save money on your health insurance costs, you might want to pass on the employer coverage and shop for an individual plan.
Is Health Insurance Getting More Expensive?
It certainly feels like it. And it’s true that over the last decade, health care costs have risen significantly. The average family is paying 55% more in their premium in 2020 versus 2010 according to the Kaiser Family Foundation.5 And that number is up 22% since 2015.6 But premiums have only risen 4% when comparing 2020 against 2019.7
Health care costs also change based on where you live. In some states they’re up, in other places they’re lower.
If you feel like you’re drowning in sky-high health insurance costs, there are some ways to save money on health insurance. Don’t give up hope. You always have options, even if it just helps your budget a little. There are also some ways to save on health care costs your insurance doesn’t cover.
And if you’re trying to cut costs while paying off debt, or you’re just starting to budget and barely making ends meet, you might want to choose a high-deductible and lower-premium plan that will kick in if you have serious medical issues or an accident. This allows you to focus on your necessities (we call them the Four Walls) before you tackle an expensive health care plan.
What Affects My Health Insurance Premium Costs?
Your Gender and Marital Status
Under the Affordable Care Act, insurance companies are no longer able to charge consumers more based on their gender.8 But other factors do make a difference. For instance, if you’re married and have kids, you can expect to pay more to cover your family’s needs. Note that if your family’s income falls below a certain level, a tax credit could save you money.9 (Check Healthcare.gov to see if you and your family qualify.)
But marital status aren’t the only things that determine how much you could be shelling out. Here are some other things insurance companies look for.
Your Personal Details
Age: When it comes to the cost of health insurance, age also makes a difference. The older you are, the more you’ll pay for health insurance—sometimes up to three times more.10
Smoking: If you’re a smoker, insurers can charge you up to 50% more for health insurance, unless you live in these seven states: California, Connecticut, Massachusetts, New Jersey, New York, Rhode Island and Vermont.11 These states have passed laws against charging smokers more. For everyone else, cut out smoking and you could cut that bill in half!
Location: Premiums vary by location. For example, in 2020, monthly premiums in the Northeast averaged $655 but only $626 in the Midwest.12 A family living in the Northeast averaged $1,929 compared to $1,716 in the South.13
Different Types of Plans
Shopping for a health insurance plan can sometimes feel like being in a grocery store and staring at rows of the same product for what seems like hours—only it’s less exciting and way more expensive! But comparing plans could save you money. This is because the type of plan you choose also affects your health insurance costs.
Here are the plans and networks you can shop for in the health insurance marketplace:
- Health Maintenance Organization (HMO): HMO plans limit you to doctors within a certain network. They’re usually the strictest plans but can have lower premiums.
- Preferred Provider Organization (PPO): PPO plans are similar to HMOs but give you a little more flexibility. You’ll pay less for medical care if you use a provider within the plan’s network. You are allowed to access out-of-network providers but they’re more expensive.
- Exclusive Provider Organization (EPO): EPO plans limit you to in-network providers except for emergencies.
- Point of Service (POS): POS plans offer benefits like lower medical bills if you use doctors, hospitals and health care providers in the plan’s network. Keep in mind you’ll need a referral from your primary care doctor in order to see a specialist.
- High-Deductible Health Plan (HDHP): HDHP plans are exactly what they sound like. You pay a higher-than-normal deductible but you get much lower premiums. You can also use pre-tax health savings accounts (HSAs) with these.
- Short-Term Plan: Short-term plans are temporary health insurance policies that bridge the gap when you’re between jobs. They’re usually from three months to just under a year.
- COBRA Plan: Not to be confused with a deadly snake, COBRA plans are similar to short-term plans but last longer. They help you prevent a gap in your coverage if you lose your job.
- Catastrophic Plans: Catastrophic plans mostly apply to young adults under the age of 30. They have lower premiums and high deductibles.
Different Levels of Coverage
Okay, stay with us here. We’re almost done with this marathon investigation into all things health insurance. We looked at the different types of plans, but there’s a little more to it before we put a bow on all this.
When it comes to marketplace health care plans, there are four different levels—bronze, silver, gold and platinum. Think of them like medals at the Olympics. (Except when it comes to health care, you don’t always want to go for the gold!) These tiers give you different options on how much your plan will actually pay out versus how much you’ll pay. Also keep in mind they don’t reflect quality of care.14
Generally speaking, plans with a lower monthly premium will mean a higher deductible, and vice versa.
Bronze is one step up from a catastrophic plan. They give you lower monthly costs, but more out-of-pocket expenses.
Silver offers lower deductibles and out-of-pocket costs than Bronze, but you’ll pay more in monthly premiums. And depending on your income, silver plans also come with discounts called cost-sharing reductions where the provider could cover costs up to the 90% mark.
Gold plans have high monthly premiums but low deductibles, coinsurance and out-of-pocket costs.
Platinum is the highest monthly premium out there, with the lowest out-of-pocket costs. This type of coverage means you’re really putting all your eggs in that big monthly premium basket! But having a lower deductible means your insurance company will start covering those crazy health care expenses a lot sooner.
How to Get the Best Health Insurance
If you’re looking to purchase health insurance on your own, you can just go to the websites of major health insurance companies in your area and see what plans they provide. You can compare plans on your own, although quotes will vary pretty widely.
But let’s face it. This is a ton of work. Choosing the right health insurance plan for you or your family is a daunting task. And you probably have better things to do with your time than sifting through endless health insurance quotes.
That’s why we recommend using our trusted and independent insurance agents for your health insurance needs. They’ll look at your situation and compare the best rates so you can get the coverage you need. They’ll help you understand the marketplace or even what your employer is offering. And the best thing? They’re free!
Connect with one of our insurance agents today.