What Determines the Cost of Health Insurance?

Everyone in the U.S. needs health insurance today. When you reach age 65, Medicare provides low-cost health coverage. Below that age, the cost of health insurance can vary, depending on a number of factors. Since the Affordable Care Act (ACA) went into effect, insurance companies are using different factors to determine premiums for health insurance plans. For example, under the ACA, your gender and your medical history can no longer affect your premiums or your access to health coverage. Today, insurers can only use certain factors in determining health insurance premiums.

Age
The older you are, the higher your health insurance premiums are likely to be – until you reach age 65. Older people pay premiums that can be three times the amount younger people are paying. This is because the older a person is, the greater the chance of developing a chronic health condition. In general, older adults tend to use health care services more than younger adults.

Location
The cost of living can vary from state to state and from city to city. This applies to the cost of health insurance, as well as to the cost of housing, food, gas, etc. More competition among insurance companies in the area usually means lower premiums. State and local rules can also affect your rates.

Number of People Covered
Health coverage for a single individual can cost considerably less than coverage for the entire family. However, a family health plan makes sense in most cases. You and your spouse would probably pay more altogether for individual plans than you would pay for a family plan.

Tobacco Use
Under the ACA, insurers are allowed to charge more in premiums for people who smoke, use tobacco, or have used it within the past 12 months. This tobacco surcharge can amount to up to 50% of the premium. Apparently, the purpose of the surcharge is to give people financial incentive to quit smoking.

Coverage
Health insurance plans are rated according to the amount of coverage they provide, and the out-of-pocket expenses required. Typically, the less you pay out of pocket, the higher the premiums. The four designated categories of health plans under the ACA are:

Bronze: These plans have the highest out-of-pocket expenses and the lowest premiums. The annual deductible can be more than $6,000. A bronze plan may be a good choice if you rarely need to see a doctor.
Silver: Silver health plans have higher monthly premiums but lower out-of-pocket expenses than bronze plans.
Gold: Although monthly premiums are high, out-of-pocket expenses are much lower with a gold plan. This may be a good option if you have a chronic medical condition and need a lot of care.
Platinum: This type of plan has the highest premiums and the lowest deductibles and out-of-pocket expenses. Medical costs may be entirely covered under a platinum plan. This type of plan may be a good choice for someone with extraordinary medical expenses.

If you are choosing a health plan, speak with one of our friendly agents. We can help you find the health coverage you need at the lowest possible cost.