What Is a Health Insurance Premium?

There are several types of costs that you have to consider when choosing a health insurance plan. Often, if the monthly premium is low, some of the other costs, such as copays and deductibles that you pay out of your pocket, may be high. Or if the premium is high, then other costs may be low. When you’re shopping for health insurance plans, you’ll want to find a balance that’s right for you and your family.

Some of the other healthcare costs to consider include:

Copay. This is a fixed amount you pay for a covered service. It could vary depending on the type of service or provider. Copays typically remain the same throughout your plan year, even after you have met your deductible.

• Low copays often mean higher monthly premiums.
  
• Some plans do not have copays. This means that you pay the entire amount for a covered service until you meet your deductible. These types of plans are likely to have lower monthly premiums.

Deductible. This is the amount you pay out of your pocket for covered services before your plan starts to pay. This does not include services covered by copays, and your copay costs usually do not count toward your deductible.

• Low deductibles usually mean higher monthly premiums.
• High deductibles usually mean lower monthly premiums.

Coinsurance. This is a percentage of covered healthcare costs that you have to pay after you have reached your deductible.

• Low coinsurance percentages usually mean higher monthly premiums.
• If you reach your out-of-pocket max, your plan should pay 100%, and you will no longer have to pay your coinsurance percentage.

Out-of-pocket max. This is the maximum you have to pay for covered services, including your deductible and coinsurance, each plan year. Once you have paid this amount out of your own pocket, your plan should pay 100% of the costs of covered, in-network care.

• Low out-of-pocket maximums typically mean higher monthly premiums.
• Your monthly premium payments do not count toward your out-of-pocket max.

When shopping for a plan, carefully consider all these possible additional expenses. The plan with the lowest monthly premium may not be the best choice for you and your family. If you have young children, chronic medical conditions or require extra medical care, you may benefit from a plan with lower out-of-pocket costs – even if the monthly premium is higher.

Under the healthcare law, only five factors can be used to determine your premium price: your age, your location, the number of people enrolled on your plan, your plan category (bronze, silver, gold, platinum or catastrophic) and your tobacco use. Some states limit how much these factors can affect premium pricing.

1. Age. Healthcare costs tend to be higher for older people, so plans are allowed to set higher premiums according to age.

2. Location. Where you live matters when it comes to premium prices. This is because factors such as state and local rules and cost of living all affect premium prices.

3. Number enrolled. Insurers can charge more to cover spouses and/or dependents on the same plan.

4. Plan category. There are five plan categories – bronze, silver, gold, platinum and catastrophic – with the main differences being how you and the plans share the cost of your care. Plans that offer lower copays and lower deductibles are likely to have higher monthly premiums.

5. Tobacco use. Smoking can damage your health and cause life-threatening diseases, such as cancer, diabetes, and heart or lung diseases. This is why premiums for smokers are often more than for nonsmokers.