A new health insurance policy for you and your family is available every year. As time passes, you may find that your premiums fluctuate annually. To what end, though? I’m curious as to why some plans are so much more expensive than others.
Since the implementation of the Affordable Care Act (ACA), also known as Obamacare, insurance companies have adjusted the criteria they use to set premiums for various insurance policies.
If you want to save money on your monthly premiums, it’s important to understand what factors go into determining them as you compare plans for the following year.
Factors That Influence the Cost of Your Health Insurance
The premium is the regular payment made for a health insurance plan, whether it be purchased through the HealthCare.gov marketplace, an insurance company, or an employer.
To maintain coverage, you must pay your premium even if you do not use your health insurance in any way. It used to be that insurance companies could consider a wide range of factors, such as your BMI, family history, and occupation, to decide your premium. As of now, owing to the ACA, there are just five characteristics that insurers may use to determine your premiums.
1. Your Age
In most cases, insurance premiums will increase as you enter your senior years. My mother used to moan that she had to pay $700 or more each year for health insurance, whereas I only had to pay $300 in my thirties.
According to HealthCare.gov, the average premium for someone over 65 is three times as much as it is for someone under the age of 65.
Financially speaking, it makes it reasonable to charge a larger premium to those who are older, even if this seems unfair. It’s natural that the elderly will require more medical attention than the young because of the rising prevalence of age-related chronic diseases.
It’s understandable to be frustrated about having to shell out $700 or so monthly if you’re a healthy 60-year-old who just has to see your doctor for your annual checkup.
2. Your Location
Insurance premiums vary by location, similar to how a New Yorker or San Franciscan will spend more for housing than someone in Kansas City or Memphis.
Your premiums will be affected by the regulations of your state or municipality and the level of competition in your area. Competitive markets for health insurance typically result in lower premiums than markets with a single insurer offering coverage.
3. Plan Coverage Affected Parties
Health insurance premiums tend to rise in direct proportion to the number of persons covered by a given policy. However, you shouldn’t let a greater monthly cost prevent you from acquiring the insurance protection your family needs.
Also, it’s not ideal to force everyone to buy their own policy. Compared to buying two separate plans, a family plan is likely to save you money.
4. The Use of Tobacco in Your Past
The tobacco surcharge was preserved by the ACA despite the fact that it significantly reduced the number of factors for which insurers may charge more. An insurance provider may raise your rate if you are currently a cigarette user or were one within the previous year.
The surcharge may equal up to half of the premium price, depending on the business. An individual who does not smoke would likely pay around $300 monthly for coverage. A smoker could pay $450 more per month for the same plan due to the added expense of tobacco use.
Concerns have been raised about the proposed tobacco tax increase. Its stated objective is to get individuals to stop smoking for financial reasons, but a new study published in Health Affairs reveals that this hasn’t happened. Instead, smokers appear to be less interested in purchasing insurance overall.
5. The Type of Health Insurance You Select
There are often a number of different buckets from which to select a plan. The quality of a health insurance policy can be judged by how much it covers and how much money you’ll have to pay out of pocket each year. The less you pay for medical care out of pocket, the higher your premium will be.
There are four types of health insurance available under the ACA:
- Options Package Bronze. The monthly premiums for bronze plans are the lowest, but the out-of-pocket costs for those with those plans are the highest. If you get a bronze plan, your deductible will likely be over $6,000. However, if your only medical needs are routine checkups and preventative care, a bronze plan is probably your best bet.
- Budget Silver Package. The monthly price for silver plans is more than that of bronze policies, but they have lower deductibles and copays. Without a chronic disease, a silver plan is frequently the most cost-effective alternative if you do end up needing to see a doctor for something other than normal preventative care. Silver plans are a good option if you frequently go to the doctor for minor ailments like colds and sore throats.
- In the Gold Package, You Get. Though the premiums for a gold plan are considerable each month, the costs of actual medical care are significantly reduced. A gold plan could be the best choice if you require frequent medical attention or if you have multiple chronic health problems.
- Premium Package. The rates for platinum plans are the highest, but they also have the lowest deductibles and copayments. Depending on the specifics of your platinum plan, your monthly premium may be sufficient to cover all of your healthcare expenses. If you have a number of medical issues or spend more than average on medical care, a platinum plan may be worthwhile.
Catastrophic plans make up the fifth classification; however, they are restricted to those under the age of 30 or those with verifiable financial difficulties.
A catastrophic health insurance plan could be an excellent choice for someone in their twenties who is healthy, financially stable, and has no significant medical history. Monthly premiums for catastrophic plans are the lowest, but deductibles are also the highest.
Factors that Have No Impact on the Cost of Your Health Insurance
There was a period when medical insurance providers could set their own prices with far greater leeway. Fortunately, your monthly subscription will not be affected by some of the criteria that were once used.
1. Your Sex
Prior to 2010, monthly premiums for women were greater than for males. According to a study conducted by the National Women’s Law Center, the premiums for some insurance are 80 percent more for women than for men.
The pink tax is a slang term for the practice of charging women a higher premium for medical services since they are statistically more likely to be patients.
Many plans did not provide coverage for treatments that are uniquely female, such as maternity care or contraception, thus women often had to pay more out of pocket in addition to paying higher premiums.
According to the ACA, it is illegal to charge a person more for health insurance because of their sexual orientation.
Finally, many previously women-only health services are now included in the definition of preventative care and must be delivered to you at no additional cost by a doctor or medical professional in your insurance company’s network. Services including Pap smears, contraception, mammograms, and prenatal care are all paid for by the government.
2. Medical background
One of the most significant new provisions of the ACA is the elimination of preexisting condition exclusions and guaranteed issue provisions from health insurance. Prior to this reform, insurers had the option of not covering the expenses of treating previous diseases or charging their customers a higher premium.
Having a preexisting disease like diabetes, cancer, or asthma might result in an insurance company rejecting an applicant or refusing to pay for necessary medical care.
Those times have passed, thank goodness. The cost of your insurance will not increase because of any preexisting or newly diagnosed significant medical condition. As an added bonus, you need not stress over being uninsured.
Additional Factors to Take into Account When Choosing a Health Insurance Plan
Though premium costs are important, they shouldn’t be the only factor you consider when picking an insurance policy. Verify that the scope of your coverage and the services provided by your plan are satisfactory. In the alternative, you might have to pay a lot of money out of your own pocket.
While considering various health insurance plans, you should also consider the following:
- Network. In most cases, insurance companies will have pre-established networks of hospitals and physicians who have agreed to take the reduced payments that the insurance company has negotiated. Your present medical staff should ideally be part of the insurance company’s network. If you can’t afford your current doctor, you’ll either have to find a new one or spend more money out of pocket.
- Insurance premiums can be deducted from the account’s balance. If your health insurance plan has a high deductible, you may be eligible to open a health savings account (HSA) with a third-party provider like Lively. Deposits into a health savings account (HSA) qualify for a tax deduction, lowering your tax liability. However, the money you put aside must be spent on healthcare.
- Pharmaceutical Benefits. Those who need to fill prescriptions should research whether or not the various plans include brand-name medications in addition to generics. If the plan you select does not provide adequate prescription drug coverage, you can enroll in a Discount Drug Network prescription discount card program.
- Structure of a Strategy. It’s common to see abbreviations like HMO, PPO, and EPO when researching health insurance. In the next paragraphs, we’ll delve deeper into these topics.
- Fees for Shared Responsibility in Insurance Payments and Claims. Your out-of-pocket costs may come in a variety of forms, depending on the specifics of your chosen plan. Co-payments are due at the time of service and are often smaller than annual deductibles. There’s no set minimum; it may be $50 or $10. The deductible is the out-of-pocket expense you must meet before your health insurance kicks in and covers any additional costs. The cost can range from a few hundred to several thousand dollars, depending on the specifics of your policy. After the deductible has been met, the patient is responsible for paying their share of the remaining medical expenses, known as co-insurance. Your health care costs will be affected by all three of these factors.
- Your Present and Past Medical Conditions. Your medical requirements may change over time. A diagnosis of chronic disease is not always foreseeable. However, there are some things you can plan for, such as your fertility status in the coming year. You may want to take into account the possibility of a recurrence of a preexisting condition while making decisions during open enrollment, especially if you have a history of a condition like high blood pressure or cancer.
Which HMO, PPO, or EPO Should I Pick?
Picking a different plan type will impact more than just your monthly payment. That changes the way your policy operates as well. To better serve its members, HMOs typically contract with a large group of doctors’ offices and hospitals.
Any medical professional wanting to participate in an HMO network must be willing to charge the premiums established by the HMO.
The premium for HMO members is typically lower than that of those with other types of plans because the overall cost of care is less. With an HMO plan, you’re stuck using only the hospitals and doctors that are part of the HMO’s contracted network.
Similar to HMOs, PPOs are groups of doctors and hospitals who work together to provide better care to their members. In exchange for a set fee, they’ve committed to providing medical services to clients.
To take advantage of your PPO plan’s discounted rates, you must see a provider who is part of your plan’s PPO network. Even if your insurance will cover a visit to an out-of-network provider, you will be charged more than the standard amount.
While there are some similarities between a health maintenance organization (HMO) and a preferred provider organization (PPO), an EPO also has several characteristics of the latter. If you go to a provider who is part of the EPO’s provider network, you’ll pay less for your care. A majority of insurance plans will not pay for care rendered by a doctor who is not in their network.
A further distinction between HMOs and PPOs/EPOs is the requirement to select a primary care physician (PCP). Regular visits to your PCP are important, and you should also go to them if you’re sick.
It is their responsibility to send you to a specialist if they determine that you require such attention. You are not required to select a primary care physician (PCP) whether you have a PPO or EPO. There is no need for a referral to consult a specialist.
Bottom Line
Medical insurance and health care expenses are complex issues, and the monthly premium is only one indicator. The out-of-pocket expenses covered by a plan can be rather high if the premium is low, whereas they are more likely to be moderate under a higher premium plan.
If you do not have access to health insurance through your employment, it is important to keep in mind that your ability to pay for health benefits is impacted by your income.
It’s possible that your family’s size and income will make you eligible for Medicaid, or that you could receive a premium tax credit or tax deduction. When you reach age 65, you become Medicare-eligible.
