Health insurance is a major cost for most Americans.
The good news is that health insurance costs aren’t increasing as much annually as a decade ago. Back then, employer-sponsored health insurance plans saw double-digit increases in some years. Employer-sponsored health plan premiums now increase by about 3% on average annually for single coverage and 5% for family coverage.
Individual health insurance plans also saw large premium spikes in the early 2010s. That’s changed over the past few years. Average premiums in the Affordable Care Act (ACA) exchanges now grow on average at about 4% annually. Some ACA plan premiums have actually decreased in recent years.
Let’s take a look at what influences health insurance costs and how much you can expect to pay for health insurance each month.
How much does health insurance cost per month?
The amount you pay for health insurance depends on multiple factors. Here are eight influences:
- How you get health insurance — If you receive coverage through an employer, you’ll likely pay less than a person with an individual health plan. However, a person with an ACA plan who’s eligible for subsidies could spend about the same or even less for health insurance.
- Type of plan — A plan’s design can double or triple the cost of premiums for an employer-sponsored plan. A preferred provider organization (PPO) plan usually has the highest premiums. A health maintenance organization (HMO) has lower premiums, while a high-deductible health plan (HDHP) has the lowest premiums. However, an HDHP has the highest out-of-pocket costs when you seek care. The plans with the lowest premiums usually have the highest out-of-pocket costs and plans with the highest premiums have the lowest out-of-pocket costs. The same is true for the individual market. The ACA marketplace classifies a plan’s cost by metal type: Bronze, Silver, Gold and Platinum. The higher you go in the metal types, the higher the premiums but lower the deductibles. So, a Bronze plan has the lowest premiums but the highest out-of-pocket costs, while a Platinum plan is the reverse.
- Where you live — Your state can influence health plan choices and costs, especially in the ACA exchanges. Kaiser Family Foundation estimated that more than four insurers per state on average are offering ACA plans in 2020. More than two-thirds of ACA plans enrolled have at least three options. More than 10 insurers have ACA plans in California, New York and Wisconsin. However, only one company provides ACA plans in Delaware and Wyoming. The more insurers in the marketplace, the more likely that you’ll be able to find an affordable plan that meets your needs.
- Size of your company — Your employer’s size plays a part in health plan costs. The ACA requires employers with 50 or more full-time equivalent employees to offer health insurance to full-time employees and pay at least 50% of the annual premiums. Employees at smaller companies often pay higher health care costs than those in larger companies. Smaller businesses don’t have the buying power as large companies or the reserves to help pay for coverage.
- Health of coworkers — A health insurer may charge your employer more for health insurance based on the overall health of employees. If the insurer faces many high-cost claims over a year, it will likely increase the employer’s rates, which can be passed down to you through higher premiums and deductibles the next year.
- How much your employer pays — Employers usually handle the majority of health care costs. Kaiser Family Foundation estimated that employees cover 17% of the health insurance premiums for single coverage while employers pick up the remaining 83%. Employees pay 27% of premiums for family coverage; employers pay the other 73%. The percentage your employer pays for plans influence your costs.
- A plan’s deductible — When comparing plans, it’s vital to compare deductibles. You may find a plan with low premiums, but large deductibles. The average employer-sponsored family coverage deductible is $3,751. That includes an average of $4,552 for an HDHP. The average family deductible in the individual market is even higher ($8,439), according to eHealth. Keep that in mind when you’re comparing plans.
- How many people are covered — Family plans cost much more than single coverage. Whether you have one or four other family members on your health plan, you’re likely to pay much higher rates than if your plan only covered you.
How much is health insurance a month for a single person?
There’s a big difference between premiums depending on whether you get coverage from an employer or on the individual market. Employer plans are often cheaper than an individual plan.
Here are the average monthly premiums for single coverage:
- Single coverage in the employer-sponsored market: $104
- Single coverage in the individual market: $456
Here are the monthly premium averages for each of the three most common types of health plans in the employer-based market, according to Kaiser Family Foundation’s 2020 Employer Health Benefits Survey:
- PPO: $111
- HDHP: $87
- HMO: $101
PPOs have the highest premiums, but that comes with lower out-of-pocket costs than HDHPs and fewer restrictions than found in HMOs.
Individual plans are usually more expensive, but the ACA marketplace offers subsidies for people who make less than 400% of the federal poverty level. Those subsidies reduce ACA plan premiums.
eHealth said the average monthly premiums for individual insurance by metal type are:
- Bronze: $448
- Silver: $483
- Gold: $569
- Platinum: $732
The metal tiering is based on premiums and out-of-pocket costs. Bronze plans have the highest deductibles, but the lowest premiums.
Here’s how each plan is broken down:
- Bronze — Insurer pays 60% of health care costs; you pay 40%.
- Silver — Insurer pays 70% of health care costs; you pay 30%.
- Gold — Insurer pays 80% of health care costs; you pay 20%
- Platinum — Insurer pays 90% of health care costs; you pay 10%.
How much does health insurance cost for a family of 4?
Family coverage often costs more than twice what it costs for single coverage. Here are the average monthly premiums for employer-based plans and individual plans:
- Family coverage in the employer-sponsored market: $466
- Family coverage in the individual market: $1,152
Broken down further by plan type, you’ll find that family plan premiums often quadruple compared to single coverage. Here are the monthly premium averages for family coverage in the employer-sponsored market:
- PPO: $501
- HDHP: $404
- HMO: $441
You’ll also find that high-deductible plans in the individual market have the lowest premiums. The average monthly family coverage in the individual market by tier is:
- Bronze: $1,041
- Silver: $1,212
- Gold: $1,437
- Platinum: $1,610
Remember that these are averages without subsidies. You may be able to find more affordable plans if you’re eligible for subsidies.
5 ways to lower health care costs
So, we talked about how much health insurance costs monthly. Now, let’s look at five ways that you can keep health care costs in check:
- Shop and compare health plans — If you’re choosing an employer health plan, compare your options. Don’t just rely on one factor, such as the premium or deductible. If you’re looking at individual health plans, make sure to compare the costs and plan designs.
- Choose an HDHP plan — If your main goal is to have the lowest premiums, choosing an HDHP could be wise. If you decide on an HDHP, remember that you’ll pay more out-of-pocket when you need health care than people with a PPO or HMO. An HDHP might not be the right choice for people who require regular health care.
- Get an HSA or HRA — Your employer will likely offer you a health savings account (HSA) or health reimbursement arrangement (HRA) if you have an HDHP. These accounts let you save money for health care needs. Many employers also contribute to these accounts. You save money in these accounts tax-free, which can stretch your health care dollar.
- Check about subsidies in the ACA marketplace — People who get individual health plans through the exchanges could be eligible for subsidies to reduce health costs. People who make less than 400% of the federal poverty level are eligible for cost-saving subsidies. The exchanges will estimate your costs with subsidies when you provide your income information when comparing plans.
- Stay in-network — An HMO requires you to get in-network care. If you get care outside of your network, you’ll likely have to pay all the costs. PPOs have wider networks than HMOs and let you get out-of-network care, but it’s still wise to get as much care in-network as possible. Out-of-network care costs more in PPOs than in-network care.
How much you pay for health insurance varies by plan, but by doing your research and conducting best practices to contain health costs, you can find a plan that works for you and health insurance that doesn’t break the bank.