A health insurance premium is an advance payment on behalf of an individual or family to keep their health insurance policy active. Premiums are usually paid monthly when making purchases in the individual market, although individuals who receive insurance through their employer usually pay a portion of the premium through their salary.
In addition to premiums, consumers may have to pay out-of-pocket costs – deductible, co-pay and currency-insurance when they seek medical care.
What are the key features of a health insurance premium?
When all other things are the same, higher premium plans will usually cost less out of pocket than other plans of the same insurer.
- High-deductible plans with lower monthly premiums can be less expensive overall if you or your covered dependents require relatively less medical care.
- If you are not eligible for medical insurance through work, you may be eligible for government-subsidized coverage through plans sold for Medicaid or healthcare.
- People 65 years of age or older usually pay a much lower premium through Medicare than they do with policies sold in individual markets.
Understand what is a health insurance premium
A health insurance premium is the cost of paying your policy that you pay on every month. If you avoid your premium payment, the insurer will eventually give up your healthcare coverage.
Premium is not the only cost to get medical services. Even after paying your monthly fee, you may have to pay out-of-pocket costs depending on the amount and care you receive. These include:
Deductible: The amount of medical bills you need to pay before you start paying your insurance claims.
Copays: Copays are a certain amount that you have to pay for medical visits and services like prescription drugs. The insurer pays all or some of the remaining amount.
Currency insurance: A percentage of the medical bill you have to pay even after your deductible has been reached. The insurer pays the rest of the bill.
The amount of these out-of-spending limits varies from one insurance plan to the next. Even the same insurer plan may have different levels. In general, the higher your premium costs, the lower your out-of-pocket costs.
Plans also have the highest annual out-of-pocket. Once that amount is met, you no longer have to pay for the covered medical expenses.
A simple example of a health insurance premium
Suppose you are shopping for health insurance in an individual market because your employer does not offer coverage as part of its benefit package. Insurer XYZ has two plans.
The first plan has a monthly premium of $ 800 and an annual discount of $ 1,000 and a currency insurance of 20%. The monthly plan of the second plan proposed by XYZ is only $ 400, but a higher deductible of $ 5,000 and 30% a currency insurance.
The first option will cost you double the premium. As a result, if you carry relatively low medical costs for the year, your medical costs will be more expensive than you would buy a second plan.
However, if you end up visiting the hospital overnight or need several trips to the doctor’s office throughout the year, you may have that first plan. Once you pay the first $ 1,000 in covered medical expenses, your plan will pay 80% of the remaining costs until you reach the maximum out of pocket. Remember, though, you will still be liable to pay 20% in monetary insurance.
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