A lot of people make the false assumption that individual health insurance costs more than group health insurance. The difference is that you buy the first kind, and you get the second kind through the company you work for.
How much does individual health insurance cost?
Statistics show that individual health insurance is more affordable than group coverage on average. What is more, small businesses can offer their employees a third type of insurance to minimize their health benefit costs thanks to new laws passed in 2016.
According to data of the Kaiser Family Foundation for 2018, average monthly premiums for self-only coverage amounted to $574 per month. The amount of average monthly premiums for family coverage was $1,634. The expenditure for the average family premium increased by 5 y/y, while the expenditure of the average premium for single coverage rose by 3%.
As for individual health insurance, it cost $440/month on average for single coverage that year. Individual coverage is still cheaper than group coverage notwithstanding the fact that the price of individual health insurance has increased by a whopping 123% for single coverage in the past decade. The price of family coverage has increased by 174%.
Deductibles, Coinsurance, and Copays
If you pay your premiums each month, your coverage will not cease. However, having insurance coverage isn’t the same as having all your healthcare expenses paid.
As Healthcare.gov writes, “Deductibles are the amount you pay for covered health care services before your insurance plan starts to pay. With a $2,000 deductible, for example, you pay the first $2,000 of covered services yourself. After you pay your deductible, you usually pay only a copayment or coinsurance for covered services.” Premium costs are often closely linked to deductibles. People usually pay less for insurance policies with higher deductibles and vice versa.
Coinsurance is the proportion of costs of a covered healthcare service a person pays (for example 15%) after they have paid their deductible. For example, a health insurance plan covers a visit to the doctor for $100 and your coinsurance is 15%. If your deductible has been paid, you must pay 15% of $100, or $15.
There’s still an (albeit low) fee to pay for health care even if your health insurance policy has only low deductibles or none at all. Also known as “co-pay” or “co-payment”, this fee applies to services like office visits and prescriptions. On the other hand, the deductible applies to lab tests, hospitalizations, and surgeries. If you monthly premiums are lower, your co-payments may be higher.
All these factors contribute to the amount you pay for health insurance each month.