How much does health insurance cost? Across the United States, Americans pay wildly different premiums monthly for medical coverage. Though these premiums are not determined by gender or pre-existing health conditions thanks to the Affordable Care Act, a number of other factors impact what you pay. We explore those factors below to help you understand how much you might pay for health insurance and why.
- Many factors contribute to the price of health insurance premiums, including state and federal laws, where you live, whether you get insurance through your employer, and which type of plan you choose.
- In 2022, annual premiums for health coverage for a family of four averaged $22,463, but employers picked up 73% of that cost.
- The rise in employer health costs may be one reason wages haven't risen much over the past two decades.
- Deductibles can vary according to the size of the firm you work for or the type of plan you buy on a federal or state government exchange.
10 Factors That Affect Premiums
Many factors that affect how much you pay for health insurance are not within your control. Nonetheless, it's good to have an understanding of what they are. Here are 10 key factors that affect how much health insurance premiums cost.
- State and federal laws. Legislation dictates what health insurance must cover and how much insurers can charge.
- Type of insurance. Whether you are insured by an employer's group plan or buy it on your own is a factor in how much you'll pay.
- Income level. Low-wage workers tend to pay more through employers but may pay less through a federal or state exchange due to subsidies.
- Employer size. Insurance is usually cheaper at large companies.
- State of residence. Premium prices vary depending on the state and county.
- Type of community. Premiums tend to be lower in urban areas than rural ones.
- County of residence. Some counties have just one plan, while others have more competition, which can help reduce prices.
- Plan type. Preferred provider organizations (PPOs) and platinum plans through the federal Health Insurance Marketplace tend to cost the most.
- Age. Health insurance rates go up as a policyholder gets older, with older people paying rates that are three times higher than their younger counterparts.
- Tobacco use. Premiums for tobacco users cost up to 50% more.
The coverage offered by employers contributes to several of the biggest factors that determine how much your coverage costs and how comprehensive it is. Let’s take a closer look.
Employee Health Insurance Premiums
If you're fortunate enough to work for a company that provides health insurance, it might cost as much as a new car, according to the 2022 Employer Health Benefits Survey from the Kaiser Family Foundation. Kaiser found that average annual premiums for family coverage were $22,463 in 2022.
Workers contributed an average of $6,106 toward the annual cost, which means employers picked up about 73% of the premium bill. For a single worker in 2022, the average premium was $7,911. Of that, workers paid $1,327, which means employers picked up about 83%.
Kaiser included health maintenance organizations (HMOs), PPOs, point-of-service plans (PPOs), and high-deductible health plans with savings options (HDHP/SOs) in arriving at the average premium figures. It found that PPOs were the most common plan type, insuring 49% of covered employees. HDHP/SOs covered 29% of insured workers.
|Average Employee Premiums in 2022|
Source: Kaiser Family Foundation
Of course, whatever employers spend on their workers' health insurance leaves less money for wages and salaries. So workers are actually shouldering more of their premiums than these numbers show. In fact, one reason wages may not have risen much over the past two decades is because health costs have risen so much.
Which type of plan employees choose affects their premiums, deductibles, choice of healthcare providers and hospitals, and whether they can have a health savings account (HSA), among many choices.
For families in which both spouses are offered employer health insurance, a careful comparison is critical—one plan may be a much better deal than another. The partner whose plan is not used can pocket the part of their paycheck that isn't withheld for medical coverage. Or a couple with no children may decide that each should opt for their own company's plan as individuals (coverage for couples rarely involves any sort of discount—it's basically just a doubling of the individual rates).
The percentage of firms offering some health benefits in 2022.
Individual Health Insurance Premiums on the Exchanges
The federal insurance plan available at HealthCare.gov, the Affordable Care Act Marketplace, signed up 16.3 million people during the open enrollment period that ended on January 15, 2023—a record high. Of this number, 3.6 million bought coverage through the marketplace for the first time, while 12.7 million were returning customers.
Some 18 states and the District of Columbia operate their own health exchanges, which basically mirror the federal site but focus on plans available to their residents. People in these areas sign up through their state, rather than the federal exchange.
Each available plan offers four levels of coverage, each with its own price. In order of price from highest to lowest, they are labeled platinum, gold, silver, and bronze. The benchmark plan is the second-lowest-cost silver plan available through the health insurance exchange in a given area, and it can vary even within the state where you live. It's called the benchmark plan because it's the plan the government uses—along with your income—to determine your premium subsidy, if any.
The cost of premiums for people who enroll in the plans but don't get a subsidy rose an average of 4% in 2023—marking the first time since 2018 that premiums have risen. But most people do receive subsidies, and because of legislation enacted under the Biden administration, the net cost of exchange plans has gone down.
The American Rescue Plan Act (ARPA) of 2021 expanded premium subsidies, which remained in effect for 2022. Then the Inflation Reduction Act continued the expanded subsidies through 2025. The result, says the White House, is that premiums for marketplace plans cost $800 less per person per year.
Digging Deeper for Pricing Information
Average benchmark plan premiums for 27-year-olds have been decreasing since 2019, with a slight bump in 2023. In 2019, the average premium was $406, in 2021 it was $379, in 2022 it was $368, and in 2023, it was $382.
The Importance of Subsidies
The good news is that many who purchase marketplace plans will pay lower premiums through what the government calls advanced premium tax credits, otherwise known as subsidies. What are these subsidies? They are credits the government applies to your health insurance premiums each month to make them affordable. Essentially, the government pays part of your premium directly to your health insurance company, and you're responsible for the rest.
As part of the American Rescue Plan Act (ARPA) passed in March 2021, subsidies have increased for lower-income Americans and extended to those with higher incomes. The ARPA expanded marketplace subsidies above 400% of the poverty level and increased subsidies for those making between 100% and 400% of the poverty level.
You can take your advance premium tax credit in one of three ways: equal amounts each month; more in some months and less in others, which is helpful if your income is irregular; or as a credit against your income tax liability when you file your annual tax return, which could mean you owe less tax or get a bigger refund. The tax credit is designed to make premiums affordable based on your household size and income.?
Your credit is based on your estimated income for the year, so if your income or household size changes during the year, it's a good idea to update your information at?HealthCare.gov?right away so your premium credits can be adjusted accordingly. That way, you won't have any unpleasant surprises at tax time, nor will you pay higher premiums than you need to throughout the year.
Health Insurance Deductibles: What Can You Expect?
On top of premiums, everyone who carries health insurance also pays a deductible. This means you pay 100% of your health expenses out of pocket until you have paid a predetermined amount. At that point, insurance coverage kicks in and you pay a percentage of your bills, with the insurer picking up the rest. Most workers are covered by a general annual deductible, which means it applies to most or all healthcare services. Here's how general deductibles varied in 2022:
- $1,763: average general annual deductible for a single worker, employer plan
- $2,543: average annual deductible if that single worker was employed by a small firm
- $1,493: average annual deductible if that single worker was employed by a large firm
|Median Individual Deductible, Qualifying Health Plan Without Subsidies from HealthCare.gov., Plan Year 2023|
Source: U.S. Centers for Medicare & Medicaid Services.
Individuals who are eligible for cost-sharing reductions (a type of federal subsidy that helps reduce out-of-pocket costs for healthcare expenses such as deductibles and copays) are responsible for deductibles of $300 or $500 for the Silver plan, depending on their income.
A Note on Short-Term Plans
If you miss the annual enrollment period and don't have one of the reasons that qualify you for a SEP, you may have to resort to buying a short-term health insurance plan that lasts anywhere from three months to 364 days. Because these plans tend to cost an average of 54% less than exchange plans, according to the Kaiser Family Foundation, you may also decide to opt for one if you can't afford health insurance through your employer or on the exchanges (maybe you're not eligible for a subsidy).
Buyer beware: Regulations vary by state, but in general, you can expect that pre-existing conditions won't be covered; your application may not even be accepted if you have certain health problems. Other common exclusions include maternity care, mental health services, and prescription drugs. And be on the lookout for dollar limits on coverage. Short-term plans don't offer the same protections that exchange plans do and may not help enough or at all when you need coverage the most.
How Do I Find Affordable Health Insurance?
Group plans are generally cheaper than individual plans. So if you are eligible for one—through your employer, your union, or some other association—that's your best bet, in terms of coverage for the money. If that's not an option, the public health marketplaces established by the Affordable Care Act offer affordable health insurance for individuals. In most of the U.S., you can sign up for a plan offered through the federal government via the HealthCare.gov site. However, 18 states and the District of Columbia for the 2024 enrollment run their own marketplaces, and residents sign up via their sites.
How Much Is Health Insurance a Month for a Single Person?
It depends on a variety of factors, ranging from your resident state to your age to the type of plan (workplace or individual). Employer-sponsored plans average $659.25 a month, with individual employees paying about $111 of that, for example.
What Is the ACA Health Insurance Marketplace?
Established by the Affordable Care Act (ACA), the Health Insurance Marketplace is a platform that offers medical insurance plans to individuals, families, and small businesses. Eighteen states and the District of Columbia as of the 2024 enrollment offer their own marketplaces, also known as exchanges, while the federal government manages a marketplace open to residents of other states. Marketplace plans are divided into four categories that range in cost and coverage. Though offered by private companies, all must meet certain criteria established by the state or federal government.
The Bottom Line
How much you’ll pay for health insurance isn’t a number you can guess. It’s affected by many factors, few of which you can control.
If you’re buying a plan through HealthCare.gov, you can use the government’s tool for estimating which subsidies you’ll qualify for (access it here). If you’re buying insurance through your employer, review your open enrollment information as soon as it’s available so you have plenty of time to review your options, attend any information sessions, and use any comparison tools your employer offers to help you pick the most valuable plan you can afford.
U.S. Centers for Medicare & Medicaid Services. "How Insurance Companies Set Health Premiums."
Kaiser Family Foundation. "2022 Employer Health Benefits Survey."
U.S. Department of Health and Human Services. “Biden-Harris Administration Announces Record-Breaking 16.3 Million People Signed Up for Health Care Coverage in ACA Marketplaces During 2022-2023 Open Enrollment Season.”
U.S. Centers for Medicare & Medicaid Services. "The Marketplace in your state."
Kaiser Family Foundation. "Nine Changes to Watch in ACA Open Enrollment 2023."
The White House. "Fact Sheet: The Biden Economic Plan Is Working."
U.S. Centers for Medicare & Medicaid Services. "Plan Year 2023 Qualified Health Plan Choice and Premiums in HealthCare.gov Marketplaces," Pages 7 and 11.
Internal Revenue Service. "Questions and Answers on the Premium Tax Credit."
U.S. Centers for Medicare & Medicaid Services. “American Rescue Plan and the Marketplace.”
Internal Revenue Service. "Premium Tax Credit: Claiming the Credit and Reconciling Advance Credit Payments."
U.S. Centers for Medicare & Medicaid Services. "Cost-sharing Reductions."
Kaiser Family Foundation. "Why Do Short-Term Health Insurance Plans Have Lower Premiums Than Plans That Comply with the ACA?"
Kaiser Family Foundation. "Understanding Short-Term Limited Duration Health Insurance."
U.S. Centers for Medicare & Medicaid Services. “What Marketplace Health Insurance Plans Cover.”
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