What is a Health Insurance Premium? Health Insurance Premiums Explained
There are several types of insurance available for purchase in the marketplace. The plans typically cover at least some portion of your medical, surgical, and prescription drug expenses.
But before you choose a plan for yourself and your family, it is important to fully understand the most common health insurance terms, allowing you to choose the best plan that fits your needs.
Let us start with the most basic yet the most vital one: health insurance premium.
WHAT IS A HEALTH INSURANCE PREMIUM?
A health insurance premium is the monthly amount you pay for your health insurance coverage.
Health insurance is often included in employer benefit packages, with premiums usually covered by the employers but often also deducted from employee’s salary. Asking yourself, “what is a health insurance premium” before getting one would be helpful too, as choosing the right coverage can be tricky.
You might also want to keep in mind that a health insurance plan with the lowest premium may not cover much health care, hence, going after a plan with a slightly higher premium but lower deductions may be ideal for you.
After you enroll in a plan, you must pay your first premium directly to the insurance company— not to the Health Insurance Marketplace. This is to mark the beginning of your plan coverage.
HEALTH INSURANCE PREMIUMS YOU CAN AFFORD
Before deciding which health plan you should get, you must first determine the factors that should be covered by your plan. So, as you shop for your health insurance plan, consider the following:
- Your current health
- Your average annual health care costs
- Your available annual income for out-of-pocket medical expenses
After taking note of these factors, your plan provider may suggest what plan matches you the most, or what you can actually afford.
To know this by yourself, adjust your previous annual health care costs for any changes to your current health needs. If you have enough annual income to pay for your potential out-of-pocket medical expenses, then a plan with a low monthly period could be the right one for you.
However, you must still weigh the benefits of lower monthly costs against the potential risk of large out-of-pocket expenses in emergency cases, such as major illness or accident.
HOW CAN YOU PAY YOUR HEALTH INSURANCE PREMIUM?
If you have an individual and family medical plan, you are responsible for paying the full premium to your health insurance company each month. Meanwhile, if you have health insurance through work, your employer may pay a portion of your premium, while you will be responsible for the remaining amount.
CAN YOU PAY VIA HEALTH SAVINGS ACCOUNT?
No, you cannot pay your health insurance premium through your health savings account, as these tax-free funds can only be spent for out-of-pocket medical expenses.
HEALTH INSURANCE PREMIUM REBATE
According to the U.S. Department of Labor’s Technical Release No. 2011-04, the employer’s responsibility for giving the rebate to participants depends on who paid for the insurance coverage.
If the employer paid the entire cost of the insurance coverage, then no part of the rebate should be given to participant contributions. However, if participants paid the entire cost of the insurance coverage, the entire amount of the rebate would be given to participant contributions.
Meanwhile, if the participants and the employer each paid a fixed percentage of the cost, a percentage of the rebate would be attributable to participant contributions.
Three options for disbursing rebates according to DOL guidance:
- To minimize subscribers’ portion of the annual premium for the subsequent policy year for all subscribers covered under any group health policy offered by the plan.
- To lessen subscribers’ portion of the annual premium for the subsequent policy year for only those subscribers covered by the group health policy on which the rebate was based.
- To provide a cash refund only to subscribers who were covered by the group health policy on which the rebate is based.
Always remember that health insurance is an investment you should give to yourself. It is much more important to see how much it can help you in the future than focusing on the amount of premiums you should pay each month.