How Much Does Health Insurance Cost?

There’s no single answer to the question, “How much does health insurance cost?” Healthcare expenses in the United States depend on a wide variety of factors, from family size to geographic location. By looking at your own situation carefully, you can get a good idea of how much you’ll end up paying. Use this guide to help you estimate future costs and create your healthcare budget.

What is individual health insurance?

Individual health insurance is insurance that you purchase on your own, not along with a group or through an employer. Even if you buy this insurance for your entire family, it is still characterized as an “individual” plan. Since the passage of the Affordable Care Act (Obamacare), people can buy individual insurance through a government exchange or directly from a private insurance company. 

What is group health insurance?

Group health insurance is insurance offered by an employer or an employee association. The employer or association negotiates with the insurance company on plans it then offers to members of the group. If you get your insurance through your job (or a spouse’s job), then you are using a group insurance plan. 

What are average health insurance costs?

In 2022, the average monthly cost of health insurance for a 40-year-old American using a silver-level plan was $541. Remember that this is merely an average. The costs for a particular person vary widely depending on geography, age, and the quality of the plan.

How to calculate and compare health insurance costs

When choosing between healthcare plans, you’ll have to compare several metrics to decide which option is best for someone in your situation. All these numbers can get confusing, which is why it’s so important to understand exactly how health insurance works before you go shopping for a plan. If you calculate costs in the following areas, you should have a pretty good idea of which plan is right for you. 

Premiums vs. deductibles

A plan’s premium is the amount you pay to the insurance company each month. In a sense, the premium can be described as the general price of the plan. Keep in mind, however, that there are other important numbers within the plan that will determine how much you actually spend on healthcare each year. One of those numbers is the deductible, or the amount you’ll have to pay for covered health-related services before the company starts picking up some of the expenses. Whenever comparing plans, make sure you consider both the premium and the deductible to get a sense of how much you’ll ultimately spend on medical care. 

Plan benefit design

A plan’s benefit design is another factor that has a major impact on the cost and quality of healthcare. HMO and EPO plans, which are the most common on government exchanges, have low premiums but don’t cover out-of-network care – meaning you can only seek care from a list of covered providers. POS plans have slightly higher premiums and cover out-of-network care, but they require referrals from primary care providers if you need to visit a specialist. PPO plans have the highest premiums of all – but you get what you pay for in the form of out-of-network care without the need for referrals. 

Maximum out-of-pocket limits 

A plan’s maximum out-of-pocket limit represents the most you could possibly have to pay for healthcare in a year regardless of the services you use. While most people don’t reach the limit in a normal year, it’s still important to know how much you’d have to pay in a worst-case-scenario.

Factors that influence health insurance costs

From age to daily habits, all sorts of factors can influence how much you end up paying for health insurance. Generally speaking, older people have to pay more for coverage. Your home state will also affect costs, as rural areas and places with fewer healthcare options often charge higher premiums. Smokers face additional costs because companies factor in the risks associated with the habit. 

How do premiums, deductibles, cost-share, and out-of-pocket limits influence healthcare costs?

In general, paying a higher premium increases the quality of your coverage – meaning you’ll have lower deductibles and out-of-pocket limits. This, in turn, means you’ll end up paying less for the care itself when it comes time to visit the doctor. Lower premiums come with higher deductibles and out-of-pocket limits, meaning you’ll end up paying more for doctor visits as they happen. 

Can I lower my health insurance costs? If so, how?

While there’s no escaping the exorbitant costs of healthcare, there are certain measures you can take to at least limit the damage. First of all, make sure to check whether you’re eligible for government-sponsored care or government subsidies. Programs like Medicare and Medicaid are designed to provide healthcare to those who might not be able to afford it. Also, consider buying a high-deductible plan that comes along with a health savings account (HSA). This will allow you to avoid paying taxes on money that you set aside for paying medical expenses. 

About the Author: Ben Clabault is a freelance writer from Sandwich, Massachusetts. He has spent much of his adult life traveling through Latin America. He currently lives with his fiance in Santiago Atitlan, Guatemala. His areas of expertise include travel, marketing, SaaS, and global cultures. You can find his work on Copyfolio and reach out to him on LinkedIn.