HHealth insurance reduces the cost of doctor appointments, procedures, hospital stays, tests, prescriptions, and more. However, it can be difficult to figure out how much budget is earmarked for health insurance. Many factors such as B. Where you live or what type of plan you have can affect the price of your health insurance. Here’s a helpful breakdown of the average health insurance cost, along with tips on finding the best insurance plan for you.
Related: The best health insurance companies
What is health insurance?
According to Ben Handel, Ph.D., associate professor of economics at the University of California, Berkeley, who specializes in health economics, two elements come into play to define what health insurance is: “One is protection against financial risks,” he says. The reason for this are deductibles in the health insurance companies. Handel explains that a deductible is the amount of money a person pays before their insurance plan begins paying. Once this deductible is reached, that person will not have to pay any further medical expenses. Those without health insurance are not eligible for a deductible, meaning there is no cap or cap on their medical expenses.
“The second component [that defines health insurance] is that it forms a network of healthcare providers and drug formulas,” says Handel. This means health insurance will curate what type of care a person can access. This includes what doctors can treat you, what hospitals and clinics you can visit, and what prescription drugs you can get at an affordable price.
Health insurance provides protection against devastating medical expenses like surgery, hospitalization, and emergency care, as well as access to a grid of care, but it comes at a price.
What is Average Health Insurance Cost?
In the US, 55% of people have health insurance through their employer, and 20% receive coverage through government assistance—either Medicaid (available for those on low incomes) or Medicare (for those over 65 and some with a disability). ) according to the US Census Bureau. Some people — like the self-employed — choose private insurance, says Peter Kongstvedt, MD, a Virginia health expert and author. There are also 8% of people in the US who have no health insurance coverage at all.
The average health insurance cost for a single person who had health insurance through their employer was $7,040 per year in 2020, according to the Kaiser Family Foundation. The average family health insurance cost in 2020 was $21,342 per year. These numbers represent what someone pays for a health premium. “A premium is the amount you pay to the health insurance company each month,” says Dr. Kongstvedt.
A bonus is different from a deductible. “A premium is what you pay for up front [each month], regardless of whether you receive medical care or not. A deductible is something you pay in plans when you actually receive healthcare benefits,” explains Dr. Trade. For example, if your health insurance deductible is $1,000 per year, you need to cover other medical bills beyond that amount, he adds.
How to calculate and compare health insurance costs
Calculating and comparing 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 find out whether you meet the requirements for statutory health insurance. If you’re 65 or older, you probably qualify 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 will need medical care. If you are generally in good health and at low risk for serious illness, it may be in your best interest to choose a low-premium health insurance plan, whether offered by your employer or whether you have a plan for yourself buy own own, says Saunders. If you have chronic health conditions or think you might need medical care more often, Saunders recommends considering a health insurance plan with a slightly higher premium, as it likely has a lower deductible and will help you save money overall.
- Think about your future plans. If you think you could conceive within the next year, Saunders says finding a policy that covers pregnancy and childbirth-related costs is crucial.
- Consider the worst case scenario. Even the healthiest of us are at risk from unforeseen health problems or unforeseen emergencies. A plan with a higher premium but a lower deductible might be best for those concerned with catastrophe event coverage, Saunders adds.
Factors affecting health insurance costs
The Affordable Care Act prevents health insurance companies from charging people with chronic illnesses more, says Handel. However, there are factors that affect how much you will pay. According to experts, these include:
- If you are looking for insurance for yourself or your whole family. If you want health insurance that covers a partner or children, you can expect to pay more each month than if you had health insurance just for yourself.
- In which state do you live. “The average cost of health insurance varies greatly from state to state,” says Saunders. 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. States with the lowest premiums include Georgia ($3,708 per year for a single plan) and New Hampshire ($4,320 per year for a single plan). According to the trade, if you live in a state with generous Medicaid coverage, you’ll likely pay a higher health insurance premium than if you live in a state that doesn’t offer Medicaid widely.
- The population of your place of residence. In general, people living in urban areas pay a lower contribution than people in rural areas, says Dr. Kongstvedt. Because when there are fewer people, there is less competition between health plans.
- Whether your insurance coverage comes from an employer or not. As a rule, employers pay a large part of the premium, Handel notes. This means that if you buy health insurance through an employer, you will likely pay less than if you bought your own health insurance.
- If you use tobacco. Experts confirm that the health insurance companies can charge you more for the insurance cover as a tobacco user. It could even double the cost of your premium.
How to find better and more affordable health insurance
When it comes to drastically reducing your health insurance premium or deductible expenses, experts say there aren’t many easy answers. However, factors to consider include quitting tobacco use and opting for a Health Savings Plan (HSA).
Handel says an HSA is a type of savings account that allows a person to set aside pre-tax money specifically to use for health care expenses now or later.
“HSAs are useful, especially if you have a higher income,” says Handel. HSAs make the most sense for people in a higher income bracket because their marginal tax rate is higher, he adds. Conversely, people on lower incomes don’t save as much because their tax rate is lower.
Some examples of how an HSA can be used are co-payments for doctor visits, dental expenses, vision expenses, and prescriptions. A person can choose how much they want to contribute to their HSA monthly or annually, which comes from their paychecks, but the IRS limits the amount someone can contribute to their HSA. (For 2022, the maximum amount someone can contribute to their HSA is $3,650 for an individual and $7,300 for a family.)
There are a variety of variables that affect the cost of health insurance. And while it’s not easy to weigh or pay for the costs, the benefits of health insurance can outweigh the costs when it comes to routine care and medical emergencies.
More from the consultant
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.