A health insurance premium is the amount you pay to maintain your Health Insurance Coverage. Most people pay their premiums monthly, although some plans allow payments on a different schedule. Your premium is one of the first costs to consider when choosing health insurance. However, it is not the only expense you may face. Depending on your plan, you may also pay a deductible, copayments, coinsurance, and other costs when you receive medical care. For example, you might pay a $350 monthly premium for health insurance and still have to pay part of your doctor’s bill when you visit a healthcare provider. Your premium keeps the coverage active, while your plan’s benefits determine how covered medical expenses are shared between you and the insurance company.
Understanding how premiums work can help you compare health insurance options, plan your budget, and avoid choosing a plan based only on its monthly payment.
What Is a Health Insurance Premium?
A health insurance premium is the amount charged for your health insurance policy or plan. It is the cost of having coverage, regardless of whether you use healthcare services during a particular month. You may pay your premium directly to an insurance company or have it deducted from your paycheck if you receive employer-sponsored health insurance. Premium payments are separate from most costs you pay when receiving medical care. For example, you might have a low monthly premium but a relatively high deductible, meaning you pay less to maintain coverage but may have to contribute more toward certain healthcare expenses.
How Do Health Insurance Premiums Work?
When you enroll in a health insurance plan, you agree to pay the required premium according to the plan’s payment terms. You generally need to keep your payments current to maintain coverage. Here is a simple example:
| Expense | Example Amount |
|---|---|
| Monthly premium | $350 |
| Annual premium cost | $4,200 |
| Annual deductible | $2,000 |
| Primary care copay | $30 |
In this example, you pay $350 every month, or $4,200 over 12 months, to maintain your coverage. Your deductible and copay are separate expenses that may apply when you receive healthcare services. The actual amounts and payment rules depend on the plan you select.
What Is the Difference Between a Premium and a Deductible?
A premium and a deductible serve different purposes in health insurance. Your premium is the cost of maintaining your coverage. Your deductible is the amount you generally pay for covered healthcare services subject to the deductible before your plan begins paying according to its deductible rules.
| Health Insurance Premium | Health Insurance Deductible |
|---|---|
| Paid to maintain coverage | Paid toward eligible healthcare expenses |
| Usually paid monthly | Accumulates as you pay eligible costs during the plan year |
| Generally due whether or not you use medical care | Depends on the covered services you receive and the plan’s rules |
| Does not generally count toward the out-of-pocket maximum | Eligible deductible payments generally count toward the out-of-pocket maximum |
For a more detailed explanation, read our guide to Health Insurance Deductibles.
What Is the Difference Between a Premium and a Copay?
A premium is the amount you pay to keep your insurance active. A copay is usually a fixed amount you pay for a particular covered service when your plan requires one. For example, your plan could charge a $350 monthly premium and a $30 copay for a covered primary care visit. You would generally continue paying the monthly premium even if you did not visit a doctor that month. The $30 copay would apply when you receive a service covered under those copay rules.
Learn more in our guide to Health Insurance Copays.
What Is the Difference Between a Premium and Coinsurance?
Coinsurance is generally a percentage of the allowed cost of a covered healthcare service that you pay under your plan’s rules. A premium, on the other hand, is the payment required to maintain your coverage. For example, a plan might charge a $300 monthly premium and require 20% coinsurance for certain covered services after you meet the applicable deductible. If the allowed amount for a covered service is $1,000 and your 20% coinsurance applies, your share would generally be $200. This cost is separate from your monthly premium.
Read our article on Health Insurance Coinsurance for a closer look at percentage-based cost-sharing.
What Factors Affect Health Insurance Premiums?
Health insurance premiums can vary significantly between plans and individuals. The factors that affect your price depend partly on the type of coverage you have.
Age
For many individual and family plans, age is one factor insurers can use when setting premiums, subject to applicable federal and state rules. Employer-sponsored plans may use different pricing arrangements.
Location
Where you live can affect your premium. Healthcare prices, local insurance markets, state regulations, and the plans available in your area can all influence costs.
Type of plan
Different health insurance plans offer different benefits, provider networks, and cost-sharing arrangements. A plan with broader provider access or different benefits may have a different premium from another plan.
Coverage level
Individual coverage and family coverage can have different premium amounts. Adding eligible family members to a policy can increase the total cost.
Employer contributions
If you receive insurance through your employer, the employer may pay part of the premium. Your paycheck deduction may therefore be lower than the total premium charged for your coverage.
Financial assistance
Eligible people who purchase coverage through the Health Insurance Marketplace may qualify for financial assistance that lowers their monthly premium. Eligibility depends on the applicable rules and individual circumstances.
Why Do Some Health Insurance Plans Have Lower Premiums?
A lower premium can make a plan attractive, especially if you are trying to manage monthly expenses. However, a lower monthly payment may come with other trade-offs. Depending on the plan, you might face:
- A higher deductible
- Higher copayments or coinsurance for certain services
- A narrower provider network
- Different prescription drug coverage
- A higher out-of-pocket maximum
These features vary by plan, so a low premium does not automatically mean a plan is inexpensive overall. Before enrolling, review the plan’s benefits, provider network, drug coverage, and likely costs when you need care.
Does a Higher Premium Mean Better Health Insurance?
Not necessarily. A higher premium does not automatically mean that a health insurance plan provides better-quality care or is the best choice for you. A higher-premium plan may have a lower deductible or different cost-sharing features, but you should confirm those details in the plan documents. When comparing options, consider whether your preferred doctors and hospitals are in the network, whether your prescriptions are covered, and how the plan handles the services you expect to use. The best plan for you is the one that balances coverage, provider access, financial protection, and total cost according to your circumstances.
How Much Does Health Insurance Cost Per Month?
There is no single monthly premium that applies to everyone in the United States. Costs vary according to the type of insurance, location, age where permitted, household circumstances, plan benefits, and eligibility for financial assistance. For example, the amount deducted from an employee’s paycheck for employer-sponsored coverage may be very different from the full premium for an individual Marketplace plan.
Likewise, the price shown for a Marketplace plan before financial assistance may differ from the amount an eligible enrollee actually pays after an applicable premium tax credit. To estimate your own cost, compare available plans using current information rather than relying on a national average that may not reflect your circumstances.
Can You Lower Your Health Insurance Premium?
There are several ways you may be able to reduce your premium, depending on your eligibility and the coverage available to you.
Compare plans before enrolling
Review multiple plans and compare their monthly premiums alongside their deductibles, provider networks, prescription benefits, and other cost-sharing rules.
Check Marketplace financial assistance
If you are purchasing individual or family coverage, check whether you qualify for a premium tax credit through the Health Insurance Marketplace. Eligibility and the amount of assistance depend on the rules that apply to your circumstances.
Review employer-sponsored coverage
If your employer offers health insurance, compare the employee contribution and plan benefits with other options available to you. Consider the total cost and whether your preferred providers are included.
Compare total yearly costs
Do not focus exclusively on the monthly premium. A plan with a lower premium could cost you more overall if you need frequent healthcare services and face higher cost-sharing.
What Is a Health Insurance Premium Tax Credit?
A premium tax credit is financial assistance that eligible individuals and families can use to lower the cost of health insurance purchased through the federal or applicable state Health Insurance Marketplace. Eligible enrollees may be able to apply advance payments of the credit toward their monthly premiums, reducing the amount they pay directly to the insurance company. Eligibility and the amount of assistance depend on applicable rules, household circumstances, income, and other factors. Marketplace assistance rules can change, so check current official guidance before making enrollment or budgeting decisions.
You can begin with the official HealthCare.gov guide to lowering health coverage costs.
What Happens If You Miss a Premium Payment?
Missing a premium payment can put your health insurance coverage at risk. The consequences depend on your plan, the applicable grace-period rules, and whether you receive financial assistance. Some plans provide a grace period during which you may be able to pay an overdue premium and keep your coverage. The length of the grace period and the consequences of not paying can vary. If you think you may miss a payment, contact your insurance company or plan administrator promptly. Ask about your payment deadline, any available grace period, and what you need to do to avoid losing coverage.
Do You Pay a Premium Even If You Do Not Visit a Doctor?
Generally, yes. Your premium is the cost of maintaining insurance coverage, not a fee charged only when you use healthcare services. Even if you do not visit a doctor during a particular month, you generally still need to pay your premium to keep the policy active. Health insurance can also provide financial protection against unexpected illness or injury, so its value is not limited to the services you use in a typical month.
How to Compare Health Insurance Premiums Correctly
When reviewing health insurance options, use the premium as one part of a broader comparison.
Consider these factors:
- Monthly premium: How much will you pay to maintain coverage?
- Deductible: How much might you pay for covered services before the plan begins paying according to deductible rules?
- Copays: What fixed payments apply to doctor visits, prescriptions, and other services?
- Coinsurance: What percentage of eligible costs will you pay for applicable services?
- Out-of-pocket maximum: What is your limit for eligible cost-sharing on covered services during the plan year?
- Provider network: Are your doctors, hospitals, and other preferred providers included?
- Prescription coverage: Are your medications covered, and what will they cost?
- Expected healthcare needs: How often do you expect to use medical services?
HealthCare.gov recommends comparing estimated total yearly costs rather than choosing a plan based only on its premium. Your actual costs will depend on the care you receive and the terms of your coverage.
Example: Comparing Two Health Insurance Plans
Imagine you are comparing two hypothetical plans.
| Feature | Plan A | Plan B |
|---|---|---|
| Monthly premium | $250 | $350 |
| Annual premium cost | $3,000 | $4,200 |
| Deductible | $5,000 | $2,500 |
| Coinsurance after deductible | 30% | 20% |
Plan A costs $1,200 less in annual premiums, but it has a higher deductible and coinsurance rate in this example. If you need substantial healthcare, Plan B could potentially result in lower total spending despite its higher premium. If you use very little care, Plan A’s lower premium might be more attractive. This example does not establish which plan is better for everyone. You would also need to compare out-of-pocket maximums, covered services, provider networks, prescription costs, and any financial assistance available.
Common Mistakes to Avoid When Choosing a Premium
Choosing the lowest premium automatically
A low premium can be helpful, but it should not be the only factor in your decision. Review the plan’s other costs and coverage details.
Forgetting about healthcare expenses
Your premium does not generally cover every medical bill in full. Deductibles, copays, and coinsurance may still apply.
Ignoring your provider network
A plan may have an appealing premium but not include the doctors or facilities you prefer. Check the current provider directory and confirm network participation.
Overlooking prescription drug coverage
If you take medication regularly, check the plan’s drug formulary and cost-sharing requirements before enrolling.
Failing to check financial assistance
If you purchase coverage through the Marketplace, determine whether you qualify for assistance that may reduce your premium.
How PolicyHelpUSA Can Help
Choosing health insurance involves more than comparing monthly payments. Understanding premiums alongside deductibles, copays, coinsurance, and out-of-pocket maximums can help you make a more informed decision. PolicyHelpUSA publishes straightforward educational guides to help readers understand health insurance terminology and compare common plan features.
Frequently Asked Questions About Health Insurance Premiums
What is a health insurance premium?
A health insurance premium is the amount you pay to maintain your coverage. It is usually paid monthly, although other payment schedules may apply.
Do you pay a premium every month?
Most health insurance plans require regular premium payments, commonly monthly. Check your policy for the payment schedule and due dates.
Does a premium count toward the deductible?
No. Premium payments generally do not count toward your deductible because premiums maintain coverage rather than pay eligible healthcare expenses.
Does a premium count toward the out-of-pocket maximum?
Generally, no. Premiums are separate from eligible cost-sharing expenses that count toward the out-of-pocket maximum.
Can a health insurance premium change?
Yes. Premiums may change when a plan renews or when applicable rating factors or plan terms change. Review renewal information carefully before continuing coverage.
Why is my health insurance premium so high?
Your premium may reflect factors such as your plan type, location, age where permitted, coverage level, and the cost of available coverage. If you purchase Marketplace insurance, check whether financial assistance is available to you.
Is a low-premium health insurance plan a good choice?
It can be, depending on your needs and budget. Compare the premium with the deductible, copays, coinsurance, out-of-pocket maximum, provider network, and prescription coverage before deciding.
What happens if I cannot afford my premium?
Contact your insurer or plan administrator to understand your options and payment deadlines. If you buy coverage through the Marketplace, check whether you qualify for financial assistance or a different available plan.
