What is a Health Insurance Premium?
Introduction
Health insurance is a crucial part of protecting yourself and your family from unexpected medical costs. Whether you’re visiting the doctor for a routine checkup or facing an emergency, having insurance can dramatically reduce the financial burden. But to keep your health coverage active, one of the most important and consistent costs you’ll pay is your health insurance premium.
Unlike other out-of-pocket healthcare expenses like copayments or deductibles, premiums are typically charged on a monthly basis and are due whether you use your insurance or not. This makes them a predictable part of your healthcare budget—one you can plan for with relative ease.
Understanding how premiums work, what affects their cost, and how to potentially lower them can help you make better decisions when choosing a plan. It can also help you identify ways to make your coverage more affordable. Whether your insurance is employer-sponsored, privately purchased, or from the Health Insurance Marketplace, the principles of premiums largely stay the same.
In this guide, we’ll break down the basics of health insurance premiums, answer common questions, and give you tools to compare and optimize your healthcare spending. By the end, you’ll feel more confident about what you’re paying for—and why.
What is a Health Insurance Premium?
A health insurance premium is the amount you pay to keep your health insurance coverage active. Most often, this is charged monthly. It’s essentially the cost of having an insurance policy, and it’s paid regardless of whether or not you use any medical services during that time.
These payments ensure that your insurance provider continues to offer you access to care, prescription drug coverage, and protection against major medical expenses.
Premiums vary widely depending on several factors:
- Type of plan: High-deductible plans typically come with lower premiums, while plans with lower deductibles and out-of-pocket costs usually have higher premiums.
- Coverage level: Family plans cost more than individual plans.
- Income level: If you’re buying a Marketplace plan, your premium could be reduced by subsidies based on income.
- Location and age: Premiums often differ by zip code and increase with age.
Premiums are just one part of your total healthcare costs. To get the full picture, it’s important to consider other out-of-pocket costs like deductibles, copayments, coinsurance, and out-of-pocket maximums.
Does My Health Insurance Premium Count Toward My Deductible?
Unfortunately, it does not. These are two separate costs.
- Premiums are the ongoing cost of having coverage.
- Deductibles are what you pay out-of-pocket for medical services before your insurance begins to cover more of the costs.
While paying a higher premium won’t reduce your deductible directly, it often means you’ll have lower deductibles and out-of-pocket expenses. For example, a gold-tier plan on the Marketplace might have a higher premium but a much lower deductible than a bronze-tier plan. This can be helpful for people who expect to use medical services frequently throughout the year.
So while premiums don’t count toward your deductible, choosing a plan with the right premium-to-deductible balance based on your healthcare needs is crucial.
How Do I Know What My Health Insurance Premium Will Be?
To find out what your premium will be, start by identifying how you’re getting your coverage.
- Employer-sponsored plans: Your HR department or benefits administrator can provide exact premium amounts. Often, your employer will cover a significant portion of your monthly premium and deduct your share directly from your paycheck.
- Marketplace plans: Compare plans or give us a call to see what premiums will be for you.
Health Plan Advocates offer tools to help estimate your premium based on age, income, household size, and location. If you’re unsure where to start, compare plans with “Shop available plans” in the top right, or call a licensed advocate to discuss your insurance needs.
What Is a Typical Premium?
As of 2025, the average monthly premium for an individual health insurance plan is around $621, though this number can vary significantly depending on your state, age, and coverage level. For example:
- In states with more competitive markets or expanded Medicaid, average premiums can be much lower.
- Older adults may see higher premiums due to age-based pricing.
- Family plans are more expensive than individual plans.
If you’re employed, your employer typically pays a portion of your premium. According to a KFF Report, employers cover about 73% of single coverage premiums on average.
For those purchasing through the Marketplace, many qualify for premium tax credits (subsidies) that lower their monthly cost. In some cases, subsidies can even reduce premiums to $0.
How Can I Lower My Health Insurance Premium?
There are several strategies to lower your premium costs, depending on your income level, insurance source, and health needs:
- Medicaid: If you have a low income, you may qualify for Medicaid, which offers low or no monthly premiums and comprehensive coverage.
- Marketplace subsidies: If you buy a plan through the Marketplace, you may qualify for premium tax credits based on your income and household size. These subsidies can dramatically reduce your monthly payment.
- Cost-sharing reductions (CSRs): If you choose a silver-tier Marketplace plan and qualify, CSRs can lower other costs like deductibles and copays.
- Employer-sponsored high-deductible health plans (HDHPs): These typically have lower premiums and can be paired with a Health Savings Account (HSA) for additional tax advantages.
- Tax deductions: If you’re self-employed, you may be able to deduct 100% of your premium costs. Otherwise, you may be able to itemize deductions and if your medical expenses exceed 7.5% of your income, you can also deduct premiums.
- Wellness incentives: Some plans offer discounts or rewards for participating in wellness programs, completing health assessments, or using preventive services.
Choosing the right plan with your full financial and medical picture in mind is key to maximizing value.
What Factors Affect My Health Insurance Premium?
Several factors influence how much you pay for your health insurance premium:
- Income: For Marketplace plans, your income determines your eligibility for subsidies, which directly affect your monthly cost.
- Age: Older individuals generally pay more for coverage. Insurers can charge up to three times more for older adults than younger ones.
- Location: Premiums vary by zip code due to differences in competition, local healthcare costs, and state regulations.
- Tobacco use: Insurers can charge tobacco users up to 50% more than non-users in many states.
- Plan category: Bronze, Silver, Gold, and Platinum plans have different premium levels and cost-sharing structures.
Understanding how these factors apply to you can help you compare your options more effectively.
Do Health Insurance Premiums Increase As You Age?
Yes, health insurance premiums do increase with age. Under current law, insurers on the individual and small group markets can charge older adults up to three times more than younger enrollees. This pricing model reflects the higher healthcare needs of older populations.
However, subsidies on the Marketplace are income-based, not age-based. This means:
- If you’re older and have a modest income, you may qualify for a larger premium subsidy than a younger person with the same income.
- The net premium after subsidies could be similar or lower, depending on your situation.
So while base premiums rise with age, subsidies can offset much of that increase.
How Do I Pay My Health Insurance Premium?
How you pay depends on where you got your plan:
- Marketplace plans: You’ll pay your premium directly to the insurance company—not through HealthCare.gov. Most insurers offer multiple payment options, including:
- Online through their website or mobile app
- Automatic bank payments
- Phone or mail billing options
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Employer-sponsored plans: Premiums are typically deducted automatically from your paycheck on a pre-tax basis, making payments easy.
Make sure to pay your premium on time each month to avoid a lapse in coverage. Most insurers offer a short grace period, but consistent non-payment will result in cancellation.
How Do I Choose the Right Health Insurance Plan?
Choosing the right health insurance plan involves more than just picking the lowest monthly premium. Instead, consider your full healthcare and financial situation:
- Evaluate your health needs: Do you visit the doctor regularly? Take prescriptions? Anticipate any surgeries or chronic care?
- Understand your total costs: Premiums, deductibles, copayments, and coinsurance all contribute to your total yearly spending.
- Review your current plan: Is it covering what you need? Can you afford the monthly premium and out-of-pocket costs?
- Compare plans: Use the Health Insurance Marketplace or a licensed broker to compare plans based on coverage, network, and total annual costs—not just premiums.
- Check for subsidies: If you’re eligible for subsidies or Medicaid, this can open the door to more affordable options with better coverage.
Choosing a plan that balances monthly affordability with access to care ensures that you’re protected financially and medically throughout the year.
As always, please reach out to an Advocate if you would like to review your coverage options. We are dedicated to getting you the most savings through the best coverage.
