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- If you are an older person, your monthly premium under Obamacare can cost your three times more than a younger person
- You will pay a higher premium if you plan to cover your spouse and your dependents
- There are five plans you can choose from on the Healthcare Exchange (Obamacare): Bronze, Silver, Gold, Platinum and catastrophic. Each plan has its own monthly premiums and out-of-pocket costs
- Physical and medical factors also affect your premium costs such as your body-mass-index, whether you smoke or if you have any pre-existing medical conditions
If you are searching for a health insurance policy, you should know how insurance companies run their calculations to determine your monthly premium payment. Here are some factors you should consider that will help you understand how insurance companies determine your premiums.
Premiums are the amount of money you pay each month to maintain health insurance. A monthly premium is not the same as paying deductibles, coinsurance or copays.
When you are comparison shopping for medical coverage, keep in mind that lower monthly premiums usually mean higher out-of-pocket costs. Once you choose a healthcare plan, you will pay your premium directly to the insurance company each month.
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The Affordable Care Act and Premiums
The Affordable Care Act, also known as Obamacare, requires that you have health insurance or face a fine or a fee. If you are unable to find private medical insurance, you can shop for a plan on the Health Care Marketplace.
There is where you will find the bronze, silver, gold and platinum policies, also known as the “metal categories.” You can also choose a plan covering catastrophes. Here is a list of each plan.
- Bronze —These plans have the highest out-of-pocket costs with the lowest monthly premiums. Healthcare.gov recommends this policy if you have minimal healthcare needs.
- Silver — The silver plans offer moderate monthly premium costs and moderate out-of-pocket costs. If you qualify for reductions in cost sharing, healthcare.gov states you can save more money on a silver plan.
- Gold — The Gold plans require you to pay higher monthly premiums but you pay less in out-of-pocket costs. This plan may best suit you if you use extensive medical services.
- Platinum — A Platinum plan pays more of your medical costs than the other plans. However, you will pay much higher monthly premiums than the other plans. Choose this plan if you want to ensure the insurance company will pay most of your medical expenses.
How Physical and Medical Factors Affect Premiums
Several physical and medical factors affect how much you can expect to pay in premiums. Depending on the insurance company you choose and your state, you can pay 50 times more in premiums than nonsmokers. Obamacare has a provision allowing insurance companies to charge far more in premiums based on your location.
A physical factor that can affect your monthly premium is your body mass index. Also known as BMI, If you have a higher than normal BMI, insurance companies outside the Healthcare Marketplace may charge higher premiums.
Insurance companies use your BMI to assess your potential for future healthcare needs. If you have a high BMI, you are at greater risk of developing diabetes, joint problems and heart disease.
Pre-existing conditions also affect your monthly premiums. Some private insurance companies will not sell you a policy if you have a pre-existing condition. However, insurance companies that participate in the ACA’s Health Insurance Marketplace cannot deny you coverage or charge you more for coverage if you have a pre-existing condition.
Personal and Lifestyle Risk Factors
Insurance companies will consider your lifestyle choices and personal risk factors and price their health insurance plans accordingly. For example, if you work in a high-risk profession, such as working on an oil rig, you may pay higher monthly premiums.
If your profession requires you to work with hazardous chemicals, your insurance company may charge you a higher premium.
Your lifestyle choices are a risk factor insurance companies take into consideration; if you are someone who loves to drive fast cars or jump from airplanes, your premiums could cost you far more than the average person.
If you are shopping for private insurance outside the Marketplace, you should curb some of your high-risk lifestyle choices so you do not break your bank paying monthly premiums and high out-of-pocket costs.
Standard Premium Calculations
There is no standard calculation that every health insurance company uses to determine your monthly costs. However, there are some tools that will give you an estimate on how much you might expect to pay.
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