What Is a Premium in Health Insurance?

A health insurance premium is a monthly fee paid by an individual or a family to maintain their health insurance coverage. It is an upfront payment made to keep the health insurance policy active. These payments are typically due monthly, and are an important component of the overall cost of your healthcare plan. The premium is the fixed cost you pay for the policy, regardless of whether you use medical services or not.

Key Takeaways:

  1. A health insurance premium is a monthly fee paid to maintain health insurance coverage, and it’s a crucial part of the overall cost of your healthcare plan.
  2. Several factors influence the cost of your health insurance premium, including the benefits included in your plan, the number of dependents covered, your location, and whether your employer subsidizes your plan.
  3. While federal financial assistance and healthy habits can help lower your health insurance premium, it’s important to balance the cost of the premium with potential out-of-pocket expenses when choosing a health insurance plan.

Understanding Health Insurance Premiums

Health insurance premiums are the costs you pay, usually monthly, to keep your policy in force. If you stop making premium payments, the insurer will eventually end your healthcare coverage. Premiums are not the only expense you incur to receive covered medical care. On top of the monthly fee, you will likely face additional out-of-pocket medical expenses. These include:

  • Deductibles: An annual amount you must pay for covered care before your insurance starts paying claims.
  • Copays: A copay or copayment is a fixed amount you have to contribute toward the cost of doctor visits, prescription drugs, and other healthcare when the service is provided. The insurance provider pays all or part of the remaining amount.
  • 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.

Factors Influencing Health Insurance Premiums

There are a number of factors that will play a role in the cost of your specific monthly premium. The more benefits that are included in your health insurance plan, the greater your premium usually is. Furthermore, if you have a lot of extra dependents covered by your health insurance plan, your premium will probably be higher. Where you live and whether you get your insurance through your employer will also impact your health insurance premiums. Health insurance costs more in some states than in others. If you have an employer who heavily subsidizes your health insurance plan, you should be able to save money on the cost of health insurance as well.

How to Pay Your Health Insurance Premium

If you have an individual and family medical plan, you’re responsible for paying the full premium to your health insurance company each month. This may be the full premium or a portion of the premium not covered by federal financial assistance, if you qualify. If you have a medical plan through work, your employer may pay a portion of your premium. You’ll be responsible for the remainder, which you can often arrange to have deducted from your pay check each month. It’s important to make these payments on time to ensure your coverage doesn’t lapse.

Lowering Your Health Insurance Premium

If you have an individual and family medical plan (not through your work/employer), federal financial assistance may be available to help lower your out-of-pocket medical expenses and/or your premium. To find out if you qualify, visit www.healthcare.gov. You may also qualify for a lower health insurance premium if you build healthy habits. For example, your employer may provide you with a discount on health insurance if you quit smoking, get a yearly physical, or exercise regularly. Additionally, choosing a plan with a higher deductible or less coverage can also lower your premium, but it’s important to consider whether you can afford the higher out-of-pocket costs that come with these plans.


Understanding your health insurance premium is crucial in managing your health care costs. It’s important to consider your current health, your average annual health care costs, and your available annual income for out-of-pocket medical expenses when choosing a health plan. Remember, plans with high premiums tend to have lower out-of-pocket expenses, so if you incur a lot of medical expenses it may be cheaper to go for a plan with a high premium. However, if you’re generally healthy and don’t use medical services often, a plan with a lower premium and higher out-of-pocket costs might be more cost-effective. Always consider your personal health needs and financial situation when choosing a health insurance plan.

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