While the answer to this question may seem obvious, there’s much more to understanding health insurance premiums than simply a dollar amount.
Unlike the coverage you may have for your vehicle or your life insurance policy, health insurance coverage is quite a bit more complex and involves more “out of pocket” costs to an individual than simply the monthly premium.
Premiums, Deductibles and Copays, Oh My!
Despite the long history of group health insurance coverage, the vast majority of people who must pay for and make use of medical insurance are unclear on much of the costs involved.
Perhaps the most obvious and, for many, most burdensome cost is the dreaded monthly premium. After this, most people know that they must contribute to a copay for office visits to their healthcare providers and for prescriptions purchased at the pharmacy. Beyond these, and the reasoning behind them, most people either aren’t informed or choose to not take notice.
In addition to the premiums and copays, health plan members are also responsible for their annual deductible. This may be relatively high or low depending on the type of plan the individual is enrolled in. While many employees prefer the lower deductible traditionally found in PPO plans, they are also attracted to the lower premium that a high-deductible health plan (HDHP) usually offers.
Simply put, a deductible is the fixed amount a member must pay each year before their health insurance fully kicks in. Once the total amount of the deductible is paid in the plan year, their health plan begins to pick up its share of healthcare bills.
Copayments, or copays, on the other hand are fixed amounts paid each time a plan member uses a particular type of healthcare service. Typically, copays will be quite a bit smaller than deductibles.
Understanding the Health Insurance Plan Premium
It’s important for everyone involved in group health insurance, as well as individual insurance, to understand that the monthly premium is not the only cost that must be considered. In fact, in some instances, a higher premium can be easily offset by lower deductibles and lower copays.
Here’s a basic explanation of the health insurance premium:
“A monthly fee that is paid to an insurance company or health plan to provide health coverage.”
In this respect, it is very much like the premium most of us pay for our car insurance, dental insurance, life insurance and other types of insurance coverage. Health plan coverage varies in the amount that they pay and the amount that the member pays for healthcare services such as doctor visits, hospitalizations, prescriptions, and medications.
In addition, there’s often a direct correlation between the premium amount and the extent and types of services covered. While it is a bit more complex than this, you can say that generally, the less you have to pay for your coverage, the more you’re likely to have to pay for healthcare services, and vice versa.
Essentially, the premium is the payment that is made to a health insurance company in order to keep the coverage fully active. Another way of looking at it is that it’s the amount you pay to purchase your coverage.
Typically, premium payments have a set due date with a grace period. And, much like any other type of insurance coverage, if a premium is not paid by the end of the grace period, the health insurance company may suspend or cancel the coverage. This aspect is not so critical for most employees enrolled in a group health plan through their work since their share of the monthly premium is typically deducted automatically from their paychecks.
Paying the Piper – And the Premium
According to the Kaiser Family Foundation’s 2018 employer benefits survey, employers paid an average of 83 percent of single employees’ total premiums, and an average of 72 percent of the total family premiums, for employees who add family members to the plan.
This cost is quite substantial in most cases and can be even prohibitive for smaller employers. However, depending on the plans purchased, these premiums can also be lower than they would be for individuals or self-employed business owners purchasing health insurance.
Those who are self-employed, or want to simply buy their own health insurance, are responsible for paying the full monthly premium each month. Fortunately, the Affordable Care Act (ACA) provides premium tax credits to people who purchase individual coverage through their state exchange.
In California, for example, to be eligible for the state exchange Covered California, a person must,
“Be a U.S. citizen, a U.S. national or a lawfully present immigrant buying coverage through Covered California. That individual must have an annual household income between 138 percent and 400 percent of the federal poverty level (FPL) and you cannot have access to affordable, comprehensive coverage from their employer or their spouse’s employer.”
We Can Answer Your Questions
JC Lewis Insurance offers California employers health insurance plans only from leading health insurance carriers licensed to do business in California.
In addition to being expert brokers, we are licensed and certified by each insurance carrier to offer coverage to individuals, families, small group employers and to seniors with Medicare supplemental and prescription drug plans. We assist small business employers with the initial set-up, annual renewal, and on-going maintenance needed.
If you’re a small business owner looking to provide insurance coverage for your employees, you likely have many questions and concerns. Bring your questions about small group insurance and you can be confident that JC Lewis Insurance Services will help you find the right solution.