HHealth insurance lowers the cost of medical appointments, procedures, hospital stays, tests, prescriptions and more. However, figuring out how much to budget for health insurance can be tricky. Many factors, such as where you live or the type of plan you have, can affect the price of your health insurance. Here’s a helpful breakdown of average health insurance costs, along with tips for finding the best insurance plan for you.
Related: Best Health Insurance Companies
What is health insurance?
In defining what health insurance is, two things come into play, according to Ben Handel, Ph.D., associate professor of economics at the University of California, Berkeley, who specializes in health economics: One is financial risk protection,” he says. This is because of deductibles in health insurance plans. Handel explains that a deductible is the amount of money a person pays before their insurance plan starts paying out. Once this deductible has been reached, this person will no longer have to pay any other medical expenses. Those without health insurance do not have access to a deductible, meaning there is no cap or cap on their medical expenses.
“The second element [that defines health insurance] is that it forms a network of healthcare providers and drug formularies,” says Handel. This means that health insurance determines the type of care a person can access. This includes doctors who can treat you, hospitals and clinics you can visit, and prescription drugs you can get at an affordable price.
Health insurance provides protection against devastating medical costs, such as surgeries, hospital stays and emergency care, as well as access to a network of care, but it comes at a cost.
What are the average costs of health insurance?
In the United States, 55% of people get health insurance through their employer and 20% get insurance coverage through government assistance, either through Medicaid (available to low-income people ) or Medicare (for people age 65 and older and some people with disabilities). ) according to the US Census Bureau. Some people, like the self-employed, choose to purchase private insurance, says Virginia-based health care expert and author Peter Kongstvedt, MD. In the United States, 8% of people have no health insurance coverage.
The average health insurance cost for a single person who received health insurance through their employer in 2020 was $7,040 per year, according to data compiled by the Kaiser Family Foundation. The average cost of health insurance for a family in 2020 was $21,342 per year. These numbers represent what someone pays for a health care premium. “A premium is the amount you pay to the health insurance provider each month,” says Dr. Kongstvedt.
A premium is different from a deductible. “A premium is what you pay up front [each month], whether or not you receive health care. A deductible is something you pay into the plans if you actually receive health care,” says Dr. Handel. For example, if your health plan’s deductible is $1,000 per year, you’ll need to cover other medical expenses beyond that amount, he adds.
How to calculate and compare health insurance costs
Calculating and comparing the cost of premiums and deductibles is an important step in choosing the right health insurance for you. To help, Shane Saunders, co-founder of The Insurance Solutions Experts, suggests considering the following factors when choosing a health insurance plan:
- Are you eligible for Medicare or Medicaid? First, check if you meet the requirements for government-assisted health care coverage. If you’re 65 or older, you’re probably eligible for Medicare. To see if you meet the income requirements for Medicaid, visit Medicaid.gov.
- Consider your general health and how often you think you can seek health care. If you are in generally good health and at low risk of serious health problems, it may be in your best interest to choose a low-premium health plan, whether offered by your employer or purchased by yourself. diet on your own, says Saunders. If you have chronic health conditions or think you might seek health care more frequently, Saunders recommends considering a health care plan with a slightly higher premium, as it will likely have a lower deductible and help you pay. save money overall.
- Think about your future projects. If you think you’ll get pregnant in the next year, Saunders says finding a policy that covers pregnancy and childbirth costs is crucial.
- Consider the worst case scenario. Even the healthiest among us are at risk for unpredictable health problems or unexpected emergencies. A plan with a higher premium but a lower deductible may be better for those who want coverage for catastrophic events, Saunders adds.
Factors that influence health insurance costs
The Affordable Care Act prevents health insurance companies from charging more to people with chronic conditions, Handel says. However, certain factors influence the amount you will pay. These include the following, according to experts:
- If you are looking for coverage for yourself rather than your whole family. If you want a health insurance plan that covers a partner or children, you can expect to pay more each month than if you purchase health insurance just for yourself.
- What state do you live in. “The average cost of health insurance varies widely from state to state,” Saunders says. The states with the highest premiums in 2022 are West Virginia ($9,972 per year for a single person plan) and South Dakota ($9,732 per year for a single person plan), according to data compiled by ValuePenguin. The states with the lowest premiums are Georgia ($3,708 per year for a single-person plan) and New Hampshire ($4,320 per year for a single-person plan). If you live in a state with generous Medicaid coverage, Handel says you’ll likely pay a higher health insurance premium than if you lived in a state that doesn’t widely offer Medicaid.
- The population of your place of residence. In general, people who live in urban areas pay a lower premium than people who live in rural areas, says Dr. Kongstvedt. Indeed, when there are fewer people, there is less competition between health care plans.
- Whether your insurance coverage is from an employer or not. Typically, employers pay a large portion of the premium, Handel notes. This means that if you purchase health insurance through an employer, you will likely pay less than if you purchase health insurance on your own.
- If you use tobacco. Experts confirm that if you are a tocabbo user, health insurance companies may charge you more for coverage. It could even double the cost of your premium.
How to find better, more affordable health insurance
When it comes to dramatically lowering your health insurance premium or deductible expenses, experts say there aren’t many simple answers. However, factors to consider include quitting all tobacco use and joining a Health Savings Plan (HSA).
Handel says an HSA is a type of savings account that allows a person to set aside money before taxes, specifically to be used on health care costs now or later.
“HSAs are helpful, especially if you have a higher income,” Handel says. HSAs make more sense for people in a higher income bracket because their marginal tax rate is higher, he adds. People in a lower income bracket, on the other hand, will save less because their tax rate is lower.
Some examples of how an HSA can be used for doctor visit copays, dental expenses, vision expenses and prescriptions. An individual can decide how much they want to contribute monthly or annually to their HSA, which comes from their paycheck, but the IRS caps the amount of contribution a person can make to their HSA. (For 2022, the maximum a person can contribute to their HSA is $3,650 for an individual and $7,300 for a family.)
There are a multitude of variables that affect the amount of health insurance costs. And, while not an easy expense to weigh or afford, the benefits of health insurance can outweigh the cost when it comes to routine care and emergencies. medical.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.