Understanding health insurance premiums is critical if you want to get the best coverage for your needs. The premium is the fee you pay to an insurance company or health plan to keep your policy active.
It’s one component of out-of-pocket costs, which also include deductibles, copays and coinsurance. Savvy health care consumers know that premiums can be a good way to save money, but they should also consider how these fees can impact their overall healthcare expenses.
Costs
Understanding your health insurance premiums is a key step in making sure you get the coverage that works best for you. There are many different factors that can affect your monthly premium, including your age and family size.
The type of plan you choose can also impact your premium. For example, preferred provider organizations (PPOs) can cost more than health maintenance organizations (HMOs).
To help you figure out what your total yearly costs will be, think about the services and prescription drugs that you use most often. Next, estimate the deductible, copays and coinsurance you would need to cover that care.
Deductibles
One of the most important aspects of understanding health insurance premiums is the deductible. The deductible is the amount you must pay out of pocket before your insurance plan begins paying for covered services.
Generally, there are two types of deductibles: individual deductibles and family deductibles.
In most cases, individual deductibles are higher than family deductibles.
The amount of a person’s deductible depends on their income and their coverage.
Most insurance plans require a deductible before your health insurance company will begin covering services. These deductibles usually reset each year.
Copays
Understanding the costs associated with health insurance premiums can be confusing, especially if you’re not familiar with insurance terms like copays and deductibles. But knowing how much you owe out of pocket for certain medical services can help you optimize your coverage and ensure that you’re not paying more than you have to.
Copays are fixed fees that you pay each time you receive a covered service. For example, if your policy lists a copayment of $25 for an office visit, you’ll pay that amount each time you see your doctor or get a prescription drug.
Coinsurance
Coinsurance is a type of cost-sharing measure in health insurance and some property insurance policies. It’s a percentage of a covered medical service that you, as an insured person, must pay toward the cost after your policy deductible has been satisfied.
This percentage will vary based on your health plan’s network and whether you receive care from an in-network or out-of-network provider. For example, if your plan is a preferred provider organization (PPO), you’ll pay a lower percentage of the service price if you go to an in-network physician. But if you see an out-of-network doctor, you’ll pay more.
Taxes
Depending on how you set up your plan, the premiums you pay may be tax-deductible or not. The IRS determines this based on your income and how you pay for your health insurance.
Taxes are mandatory payments or charges that governments collect from individuals and businesses to finance government activities. They include federal, state, and local taxes.
The main source of revenue for the United States is income taxes. These taxes help fund social programs like Social Security and Medicare. Other sources of revenue include payroll taxes and sales taxes.
