Health insurance premiums rise year-over-year, but the good news is the Affordable Care Act (ACA) stops insurers from setting premiums based on your gender, health or medical history. Most Americans get coverage in one of three ways: through their work, the Health Insurance Marketplace and Medicare.
Health insurance costs comparison
The cost of health insurance premiums vary the most based on the plan you choose or qualify for. On the cheaper side, you might pay nothing for Medicaid or Medicare A or B, with premiums based on income and work history. Adding coverage to your Medicare plan will bump your premiums slightly. Marketplace plans have become more affordable, but employer-sponsored coverage is the most cost-effective option for most working Americans.
Keep in mind that premiums are the minimum you’ll pay for health insurance coverage. Each plan has its own out-of-pocket costs, including copays, deductibles and coinsurance, which is why it’s important to weigh those factors in along with your premium when choosing a plan.
Group vs marketplace vs Medicare vs Medicaid
Note that while many people don’t pay much or anything for Medicare premiums, most people on Medicare also add on Medicare supplemental coverage.
|Average annual premiums||$1,489||$5,544||$1,735||$0|
Around 152 million Americans have health insurance through their work, according to the healthcare nonprofit Kaiser Family Foundation (KFF). Employers typically pay the bulk of the premiums — usually 70% to 80%.
To put this into context, the average annual premium in 2019 was $6,972. On average, employers subsidized $5,483 and employees paid $1,489 — making this the most affordable way to get coverage for many working adults.
This is a breakdown of the average costs and contributions by state for a single enrolled employee. It’s based on the KFF’s latest data, which is from 2019.
Search by state:
|Average for the United States ||$1,489||$5,388||$6,972|
|District of Columbia||$1,377||$5,961||$7,338|
Average cost of marketplace plans
Under the Affordable Care Act, US citizens are eligible for subsidized policies on the Health Insurance Marketplace. The monthly premiums for these policies vary by state, and some applicants can reduce the costs with the help of subsidies.
Marketplace plans are categorized by metal tiers: platinum, gold, silver and bronze, which is the least expensive.
Average cost of marketplace plans with no tax subsidy
These are the average premiums by state without a subsidy, according to the latest KFF data from 2020. They’re based on the silver tier for a 40-year-old.
|Average for the United States||$462||$5,544|
|District of Columbia||$414||$4,968|
Average cost of marketplace plans with a tax subsidy in major cities
To compare, the average monthly cost for a silver plan once a subsidy is applied is $195, according to KFF’s subsidy calculator.
These figures are based on the prices in a major city in each state for a 40-year-old, and we’ve included the pre-subsidy premium too.
|Average for the United States||$5,388||$2,340|
|District of Columbia||Washington||$4,980||$2,340|
|New York||New York City||$7,404||$2,340|
|South Dakota||Sioux Falls||$5,736||$2,340|
|Utah||Salt Lake City||$5,352||$2,340|
How do health insurance subsidies work?
The federal government offers financial assistance to those who need help to pay for their health insurance coverage or care.
There are two types of subsidies available to those who shop on the Health Insurance Marketplace: premium tax credits and cost-sharing subsidies.
The premium tax credit lowers your monthly premium — it’s the subsidy we’ve applied in the tables above. The amount varies based on your state, income, household size and whether you or your spouse have health insurance through work. But typically, your household income must be between 100% and 400% of the federal poverty level to qualify for a premium tax credit.
For an individual, that means an income of $12,760 to $51,040 in 2021, according to the KFF. And for a family of four, it’s $26,200 to $104,800.
If you’re eligible, you’ll pay no more than 2.07% to 9.83% of your income for a silver plan — the government picks up the rest of the tab. While the premium tax credit is based on the price of a silver plan in your area, you can use it to purchase any metal plan.
Cost-sharing subsidies help to lower your costs when you need healthcare. They’re available to those with a household income between 100% and 250% of the federal poverty level and only apply to silver plans. If you qualify, you’ll pay the same low monthly rate as a silver plan — but you’ll pay less than you normally would when you visit a doctor or go to the hospital.
Average cost of Medicare
With Medicare, costs depend on the type of plan you choose and how much coverage you want. For the most popular plan — Part A: Hospital Insurance — your payroll taxes might pay for your policy in full. But if you were in the workforce for fewer than 10 years, you might be charged a premium.
These are the basic premiums you can expect to pay in 2020 and 2021 for each type of plan, according to Medicare.gov and the KFF.
|Part A (Hospital Insurance)||Most people don’t pay a premium for Part A.|
But if you were in the workforce for less than 30 quarters (7.5 years), the standard premium is $458 /month in 2020 — and $471/month in 2021.
If you paid payroll taxes for 30 to 39 quarters (7.5 to 10 years), the standard premium is $252 in 2020 — and $259/month in 2021.
|Part B (Medical Insurance)||Premiums are based on your income level.|
They start at $144.60/month — and $148.50/month in 2021.
|Part C (Medicare Advantage)||With Medicare Advantage plans, you always need to pay the Part B premium plus an additional cost.|
It varies between policies, but the average cost for standalone Medicare Advantage plans is $36/month in 2020.
For Medicare Advantage plans with integrated Part D coverage, the average monthly cost is $23/month in 2020 and is expected to decrease to $21/month in 2021.
|Part D (Prescription coverage)||Premiums depend on your plan and income.|
The average premium for a basic, standalone Part D plan starts at $13/month in 2020 and is expected to decrease to $7/month in 2021.
Plans on the higher end of the spectrum can have premiums of $100/month or more, so it’s important to compare policies.
|Medigap (Supplemental Medicare)||Varies between plans. You can expect to pay well over $100/month for coverage, and more if you’re a higher-income applicant.|
Health insurance companies price Medigap plans in one of three ways:
- Community-rated. Monthly premiums are generally the same for everyone who has that plan.
- Issue-age-rated. Premiums are based on the age you purchase the policy.
- Attained-age-rated. Premiums increase with age.
Average cost of Medicaid
You’ll typically qualify for Medicaid if your income is at or below 138% of the federal poverty level. That level is $17,609 for a single person, $23,791 for two people, and $36,156 for a family of four.
If you’re eligible for Medicaid, you’ll most likely pay no premiums to maintain your coverage.
But some states charge a small monthly premium to those with an income at or above 150% of the federal poverty level.
What out-of-pocket costs can I expect to pay?
Your premium is the fee you pay each month to maintain your health insurance coverage — but it doesn’t cover healthcare.
Depending on your policy, you may run into these costs:
- Deductible. The amount of money you’ll spend on healthcare before your insurance company steps in. Let’s say you have a $1,000 deductible — this means you’ll need to pay $1,000 for your healthcare on your own before your insurance applies.
- Copay. A set rate you’re charged for specific healthcare services. For example, you might have a $30 copay every time you see your primary care doctor and a $500 copay for emergency room visits.
- Coinsurance. Once you’ve reached your deductible, coinsurance is the percentage of your medical bill you’ll pay. Your insurer pays the rest. So, if you have a 30% coinsurance, you’ll cover 30% of each bill, and your insurer covers the remaining 70%.
- Out-of-pocket maximum. The highest dollar amount you will pay in a year before your health insurance company covers 100% of your medical bills.
- Out-of-network visits. The doctors, clinics and hospitals that aren’t in your network and won’t accept your insurance. If you go to an out-of-network provider, you’ll likely pay most — if not all — of the bill yourself.
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How to save on health insurance costs
While health insurance is less flexible than other types of coverage, there are a few ways to reduce costs. The biggest ones are to find out if you’re eligible for coverage through the workplace, government subsidies, Medicaid or Medicare.
If not, explore these options:
- Pair a high-deductible health plan (HDHP) with a Health Savings Account (HSA). These plans have low premiums and high deductibles, and most plans pay for some preventive care. You can use your HSA to pay for medical expenses not covered by insurance and save on taxes.
- Buy a high-deductible health plan and a medical supplement plan. The HDHP will help you cover expenses if you become seriously ill or injured, and the supplemental insurance will provide coverage for specific health conditions — such as accidents, disability or critical care. These plans usually don’t have deductibles, and the premiums are around $25 to $50 per month.
Factors that affect health insurance premiums
Thanks to the ACA, health insurers can’t deny you coverage or charge you a higher rate based on your gender, health or medical history.
These are the factors that may impact your premium:
- Location. Premiums vary not only by state but by region and county. Your premium is calculated based on the cost of living and the cost of healthcare in the area you live. Major cities have more competition for healthcare services, while rural areas don’t — so premiums tend to be higher. For example, Floridians can expect to pay less if they live in Miami-Dade County than Jackson County. If you’re eligible for tax credits, the amount will be tied to the cost of insurance in your area. The more expensive coverage is, the more financial assistance you’ll receive.
- Age. Some states, like New Hampshire, New York and Vermont, don’t consider your age when setting premiums. But in most states, young people have access to the cheapest rates. The base age is 21, and costs increase for those in their thirties and beyond. The biggest jump occurs for adults over 50, who may pay up to three times more than a 21-year-old.
- Tobacco use. Only six states don’t take your smoking status into account when pricing your premiums: California, Massachusetts, New Jersey, New York, Rhode Island and Vermont. In all other states, insurers can charge smokers a higher premium. This is known as a “tobacco surcharge,” and most states limit it to less than 50% of the total premium. If you’re eligible for a subsidy, you can’t use it to cover the tobacco surcharge.
- Level of coverage. Marketplace plans are broken down by metal tiers, and the higher the tier, the higher the premium. So, platinum and gold plans have the most expensive premiums, but lower deductibles, coinsurance and out-of-pocket costs.
- Number of people insured. Premiums are affected by the number of people covered under one plan, as well as their ages and tobacco use. For example, a family of three would pay more than a single person.
The cost of health insurance comes down to a few factors, including the type of plan you have and where you live. But premiums don’t tell the whole story. To estimate how much you’ll pay for healthcare, look at all out-of-pocket costs, including deductibles, copay and coinsurance. It’s impossible to predict the exact amount, but try to crunch the numbers based on the care you think you’ll need for the year.
If you’re shopping for a marketplace plan or an individual policy, compare costs from multiple health insurers.