What Is a Health Insurance Premium?
A health insurance premium is the monthly payment you make to your insurance carrier to maintain active health coverage. You pay your premium regardless of whether you use any medical services during the month. Think of it as the base cost of having insurance — separate from the costs you pay when you actually use care (deductibles, copays, coinsurance).
What Factors Affect Your Premium?
Under the ACA, marketplace plans can only vary premiums based on five factors:
- Age: Older applicants pay up to 3x more than younger applicants. A 60-year-old may pay 3x what a 21-year-old pays for the same plan.
- Location: Premiums vary by state and county based on local healthcare costs and competition among carriers.
- Tobacco use: Carriers can charge tobacco users up to 1.5x more (some states limit or prohibit this surcharge).
- Plan type: Metal tier (Bronze, Silver, Gold, Platinum) and network type (HMO, PPO, EPO) affect premium.
- Number of people covered: Adding family members increases the premium.
ACA marketplace plans cannot vary premiums based on health history, pre-existing conditions, gender, or claims history.
How ACA Subsidies Reduce Your Premium
Premium tax credits reduce the amount you pay monthly. The credit is based on the difference between the benchmark Silver plan premium in your area and a percentage of your household income. The credit is applied directly to your monthly premium — you pay the remainder.
For example, if the benchmark Silver plan costs $450/month and your expected contribution is $100/month, your tax credit is $350/month. You can apply this $350 credit to any metal tier plan — a cheaper Bronze plan might end up at $0/month after the credit.
Premium vs. Total Cost of Coverage
A low premium does not mean low cost. A plan with a $0 monthly premium may have a $8,000 deductible — meaning you pay the first $8,000 of medical costs out of pocket before the plan pays anything. When comparing plans, calculate total annual cost: (monthly premium × 12) + expected out-of-pocket spending under typical and worst-case scenarios.
What Happens If You Miss a Premium Payment?
Most carriers offer a grace period of 30 days for premium payments. If you receive advance premium tax credits, the grace period extends to 90 days — but claims may be suspended after the first 30 days and retroactively denied if you do not catch up on premiums. If your payment is more than 90 days late, your coverage will be terminated.