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Health insurance costs can vary significantly based on different factors, such as where you live, your age and the type of plan you have. In its 2021 Employer Health Benefits Survey, the Kaiser Family Foundation found the following average health care costs for employer-sponsored health insurance:
- The average annual premium for family coverage in 2021 was $22,221; of that, workers paid $5,969 per year or about $497 a month.
- The average annual premium for single-person coverage was $7,739; of that, workers paid $1,299 per year or $108 a month.
Average figures don't tell you everything, however, because your options and expenses will depend on your specific circumstances and choices. Here's what you need to know about health insurance costs.
How Much Will My Health Insurance Cost?
Your health insurance costs will depend on factors that you can control, such as the plan tier and type you choose to buy. But you can't do anything about other factors, such as your age and which programs you qualify for.
In general, public insurance programs such as Medicare and Medicaid cost less than private insurance, which you buy through your employer, a state exchange or directly from an insurance company. However, you need to meet the eligibility requirements to qualify for the public programs.
When buying a private plan, you can comparison shop and purchase a policy during open enrollment or when you qualify for special enrollment—such as when you lose health coverage from an employer, get married or move outside your current provider's coverage area.
With both public and private plans, your health care costs could depend on:
- Premiums: How much you pay each month for your health insurance.
- Deductible: The amount you pay before your health insurance starts covering expenses.
- Coinsurance or copayments: The portion you pay for services after you've paid your deductible for the year.
- Out-of-pocket maximums: The most you'll pay during the year, not including premiums, non-covered medical expenses and out-of-network care.
Premium costs are an important part of picking an insurance plan, but also consider how the other parts could impact your finances and the availability of different providers' facilities and professionals in your area.
Factors That Affect Your Health Insurance Premium Costs
To comply with the Affordable Care Act (ACA), health insurance companies can't consider your gender, pre-existing conditions or current health when setting premiums. But they can base the cost on five factors:
- Age: Premiums may increase the older you are.
- Where you live: Costs can depend on local or state laws, the cost of living as well as competition among insurers.
- Tobacco use: Tobacco users can be charged more than those who don't use tobacco.
- Who the plan covers: You may need to pay more for a plan that also covers your spouse or dependents.
- Plan tier: ACA marketplace insurance plans through the federal government have five tiers: catastrophic, bronze, silver, gold and platinum. Higher tiers cost more upfront, but you'll pay less when receiving care.
The exact impact of each factor could depend on the insurance company and state laws. Additionally, your costs can depend on other choices. For example, HMO plans tend to cost less than PPO plans in the same tier. Or, you might want to pay more to buy dental or vision coverage.
If you're purchasing a marketplace health insurance plan, you may also qualify for the advanced premium tax credit (APTC). The credit can lower your monthly premiums based on your household's estimated income for the upcoming year.
The APTC was expanded for 2021 and 2022. According to the U.S. Department of Health & Human Services, the expansion led to 40% of consumers paying $10 or less in monthly premiums. A few states also offer additional premium subsidies.
What Is the Cheapest Health Insurance?
The cheapest types of insurance tend to be public options. However, you'll need to meet the eligibility requirements.
- Medicare: You may have to be at least 65 years old, have a disability or have end-stage renal disease. Medicare Part A is free for most covered people, but there could be premiums for parts B through D.
- Medicaid and Children's Health Insurance Program (CHIP): These are joint state and federal programs that offer free or low-cost coverage to over 75 million people. You can use the HealthCare.gov tool to see if you qualify.
- VA health care benefits: If you're a veteran, you may qualify for Veterans Affairs health care benefits as long as you didn't have a dishonorable discharge from active-duty military, naval or air service. There are no premiums, but there could be copays for certain services or medications. Active-duty service members and their families may receive coverage through TRICARE.
If you don't qualify for a public health insurance program, the cheapest private options may be through your employer. However, your costs will depend on the employer's benefits.
For plans you purchase individually, you may find there's a trade-off depending on the plan's tier. Higher-tier plans may have lower out-of-pocket expenses, copays, coinsurance and maximums. But they also have higher premiums than the lower-tier plans. A lower-tier high deductible health plan (HDHP) paired with a health savings account (HSA), which offers several tax benefits, could be a middle ground.
Some people turn to health care sharing ministries (HCSM) as an alternative. These may help you with certain health care costs and tend to cost less than health insurance. But they're not technically insurance, and there may be religious requirements, eligibility requirements, limitations on what's covered and lifetime maximums.
Compare Your Options and Look for Savings
Health insurance can be a major expense, particularly as you get older and if you're looking for a family policy. Public programs tend to be cheapest and they don't follow the same enrollment periods or requirements as private options—you can enroll as soon as you become eligible. If you purchase private insurance, you can compare policies every year to see if there are options for changing coverage and saving money.