Understanding Your Premium

Historically, an insurance premium is the cost paid per month to keep your health policy active. Your medical history dictates how much you will pay for a given plan’s premiums and other costs like deductibles, copays, or coinsurance can factor into your decision on which type of coverage to purchase.

What You Should Know About Premiums Costs?

Now that you know about your premium let’s consider how premiums factor into the total cost of your coverage. Your premium is not just what it costs to keep a plan alive, but rather all of the other different expenses associated with healthcare services and treatments as well. You may have to get out-of-pocket for things like copays, coinsurance payments, or even deductibles in many cases depending on which type and level of insurance you choose – so don’t forget these!

  • Coinsurance is a percentage of your medical costs that spit between you and your insurance company. You typically pay 100% until you reach your deductible and then pay a smaller percentage after reaching the deductible.
  • A deductible is the amount of money you have to pay before your insurance company begins to pay a percentage of the costs.
  • A copay is a fixed amount that you pay for services.

How to Choose Your Premium and Deductible Explained

Health insurance premiums can vary depending on a variety of factors. This includes the individual’s health and risk for expensive care, as well as how much they want to pay upfront before being reimbursed by their policy (deductibles). The more someone wants to be covered immediately without an added fee, then it will cost them more with higher deductibles; meanwhile those who are willing or able to cover some costs themselves may end up paying cheaper rates in return.

Pros and Cons of HDHP

Pro – If you don’t need expensive health care and use your doctor for preventive care most of the time, you can save money with lower premiums and a high deductible.

Con – If you require unexpected major care, like a hospital visit, you may be responsible for a deductible of $2,500 or more before your insurance company begins to pay a percentage of your costs.

The Bottom Line on Premiums and How to Save Money?

Be honest with yourself about the type of care you anticipate needing during the plan year. A high deductible and low premium aren’t always best, and sometimes paying a little more in monthly premium costs can save a lot down the road. Here are a few tips to consider

  • Ask questions about risk. Not every company is going to factor “health risk” the same. You may have a condition that one company sees as “high risk,” and another may see it as “moderate risk,” which can save you money in your premium.
  • Know Your Options. If you’re approaching 65 years of age, consider a Medicare Advantage plan or Original Medicare. Your Medicare premiums may be lower than your current policy.
  • Read up on HSAs. A high deductible will lower your monthly premium. Saving money in an HSA with your HDHP can add up in the long run and be a valuable resource for unexpected costs toward your deductible. Also, your account earns interest and is portable.

 

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