A health insurance premium is an upfront payment made on behalf of an individual or family in order to keep their health insurance policy active. Premiums are typically paid monthly when purchased on the individual market, although individuals who receive insurance through their employer usually pay their portion of the premium through payroll deductions. In addition to the premium, consumers may have to pay out-of-pocket costs—deductibles, co-pays, and coinsurance—when they seek medical care. If you are looking for the best ways on how to lower health insurance premiums then you are at the right place.
Understanding a Health Insurance Premium Terms
Health insurance premiums are the costs you pay, usually on a monthly basis, to keep your policy in force. If you skip your premium payment, the insurer will eventually drop your healthcare coverage.
Premiums are not the only expense you incur to receive medical care. Even after paying your monthly fee, you may have to pay out-of-pocket expenses based on the amount and type of care you receive. These include:
- 1: Deductibles: The amount of the medical bill you have to pay before your insurance starts paying claims.
- 2: Copays: A fixed amount you have to pay for expenses such as doctor visits and prescription drugs at the time of service. The insurance provider pays all, or part of, the remaining amount.
- 3: Coinsurance: A percentage of the medical bill you have to pay, even after reaching your deductible. The insurer pays the remaining portion of the bill.
The amount of these out-of-pocket expense limits tends to vary from one insurance plan to the next. Even the same insurer may have different plan tiers. Typically, the higher the cost of your premium, the fewer out-of-pocket expenses you incur.
Plans also have an annual out-of-pocket maximum. Once that amount is met, you no longer have to pay coinsurance or copays for the covered medical expenses you sustain.
Many employers offer health insurance as part of their benefits package, typically paying part of the premium for their workers. One of the reasons they do this is to comply with the Affordable Care Act (ACA), which requires employers with 50 or more full-time workers to provide coverage that meets minimum value and affordability requirements. Businesses that don’t comply face significant monetary penalties.
According to a survey conducted by the Society for Human Resource Management, 20% of employers indicated their health-related benefits continue to rise, with costs ranging as high as $15,000 per employee in 2020. The costs for health care can be substantially higher for individuals who don’t receive an employer premium subsidy; either because they don’t work or don’t have insurance through their job.
Low- and middle-income individuals without employer coverage have a couple of options to reduce their premiums. One is to check whether they’re eligible for Medicaid, a state-administered federal program that typically offers lower premiums than those sold on the individual market. More than two-thirds of beneficiaries receive care through managed care plans that have a contract with their state, according to the Kaiser Family Foundation. Others receive medical care on a fee-for-service basis.
Even if you earn too much to qualify for Medicaid, you may also be eligible for a premium tax credit, or government subsidy, if you shop for plans on a health insurance exchange and meet the income requirements. To qualify for relief, you’ll likely need an income below 400% of the federal poverty line.
For adults 65 and over, Medicare uses payroll tax revenue to provide a more affordable option than members in this age group would typically find on the private market. Most recipients don’t pay any premium for Medicare Part A, which covers hospital costs. In 2021, the standard monthly premium for Part B, the section that reimburses for medical services and supplies, is $148.50 per month, while the annual deductible is $203. That cost can be higher or lower, depending on your income and whether you receive Social Security benefits
How to Lower Health Insurance Premiums
Premiums can be costly, especially if you’re paying for more than you need. Here are some ways to lower your premium without compromising on coverage.
1. Buy a policy at an early age
One of the key factors that’ll affect your health insurance premium is age. The older you are, the higher your chances of being affected by health issues and conditions. That’s why insurance providers increase insurance premiums as a person gets older. Getting a health insurance policy when you are still young and healthy means you’ll be able to get a better deal on premiums.
2. Select the right sum assured
Choosing the right sum assured is crucial for any policyholder. If you go with a higher amount of sum assured than your actual requirements, you’ll be paying extra on premium for no reason. On the other hand, if your sum assured is too low, then you won’t get enough coverage and will have to pay for some medical expenses out of pocket. Therefore, it’s important to choose the right sum assured according to your age and health status.
3. Opt for deductibles
A deductible is the amount you pay out of pocket before your insurance provider starts to pay. Some health insurance providers give you the option of choosing deductibles voluntarily, which can help lower health insurance premiums. However, you’ll have to compare health insurance plans to find policies with this option as well as choose the right amount of deductible.
4. Go for a family floater plan
If you have a family, it’s always advisable to purchase a family floater plan instead of an individual health insurance policy. A family floater plan covers you, your spouse, and your dependent children under a common insurance umbrella, making it cheaper than if you were to take out individual insurance policies for each family member. In fact, once two or more people are covered under a single plan, the cost of health coverage per person gets lowered.
5. Take advantage of your no claims bonus
Did you know that you can get a reward for not making any claims on your health insurance policy? Known as a no claims bonus, the bonus for zero claims made by a policyholder in the preceding year usually comes in the form of an increase in medical coverage or discount on the premium. A useful tip is to refrain from making small claims to save your no claims bonus.
6. Buy a top-up plan
In some cases, you might already have a health insurance policy, but would like to add more benefits to make the most of it. For example, you might have health insurance from your employer and would like to get more coverage for medical expenses than what’s offered. In that case, buying a top-up plan would be a cheaper option than buying a whole new policy.
7. Compare health insurance plans
Before buying a plan, you need to make sure you’re getting the most cost-effective health insurance for your requirements. Spend time looking at different insurance providers and plans to ensure you make an informed decision. Even though lower health insurance premiums may be desirable, cost should not be the only reason you choose a plan and adequate coverage should be the priority. You’ll also want to take details of the insurer into account, such as their credibility and claims process.
If that sounds too time-consuming or overwhelming, it’s advisable to work with a reputable insurance broker like Pacific Prime. When working with Pacific Prime, you can be sure that you’re paying the same price as you would if you went directly to the insurer.