How Much Does Private Health Insurance Cost?

Private health insurance costs vary. The only way to know what private health insurance will cost you, as an individual, is to get a quote. But before you do that, you might want to learn how insurers plan your rates.

Some US plans are more affordable. Others are expensive but provide more extensive coverage for your healthcare needs. And there are many factors that health insurers will consider before providing you with a quote, including your age, location and tobacco use. We’ll cover all of those today.

But first, it’s important to know that health insurance plans in the US are standardized. This is a rather new development in the history of health insurance in the US. And it affects your purchasing decision directly.

Let’s take a closer look.

US Health Insurance Plans are Standardized

President Obama signed the Patient Protection and Affordable Care Act (ACA) back in 2010, it took effect in 2014.

The goals of this legislation are to:

Make health insurance more affordable for low-income individuals and families
Improve patient privacy
Develop uniform, “standardized” plans – so that consumers can compare “apples to apples” when comparing coverage
Ensure that all Americans can buy health insurance – even if they have pre-existing conditions like asthma, or pregnancy

To achieve these goals, all US health insurers had to offer the same plan choices to everyone. These plans were given metal “tier” names.

The Metal Tiers of US Health Insurance

Named for precious metals, US health insurers must offer these plans:

Bronze
Silver
Gold
Platinum
(And later, Catastrophic plans were added to this list)

So, to shop health insurance intelligently, consumers must understand that a Bronze plan with Company A is virtually identical to a Bronze plan with Company B, C, and D. The same goes for all the other tiers.

The Cost of Private Health Insurance: Metal Tiers

Plan	Monthly Premiums	Deductibles	Ideal Customer
Bronze	$	$$$$	Young, healthy individuals with no health problems
Silver	$$	$$$	Healthy families that need occasional routine care
Gold	$$$	$$	Someone who needs regular care every month
Platinum	$$$$	$	This highest priced plan covers most healthcare costs, great for someone who has several known health issues, and significant healthcare expenses

The metal tiers above are determined on the actuarial value (AV) of each plan. A Bronze plan should pay for roughly 60% of your annual medical costs, leaving 40% of the bill with the customer. Silver plans will pay roughly 70%, Gold 80%, and Platinum plans pay about 90% of your medical expenses.

No matter which plan you select, there will always be some out-of-pocket expenses associated with medical care.

Each plan, regardless of metal tier, must provide coverage for standard healthcare needs.

The 10 Essential Health Benefits

Per Healthcare.gov the ten essential health benefits are:

Ambulatory (outpatient) care after a hospital visit
Emergency services
Hospitalization (for surgeries or overnight care)
Pregnancy, maternity and newborn care
Mental health, addiction and substance abuse disorders
Prescription medications
Rehabilitative services like physical therapy
Lab services
Preventative and wellness visits (like immunizations)
Pediatric services, which may include oral and vision care for children but not adults

The plans may be virtually identical from one insurer to the next, but the prices are not.

Private Health Insurance Costs Vary, Even Though Plans are Standardized.

The next key point that consumers must understand is that local markets, regions and networks influence your private health insurance cost.

Let’s imagine a nation-wide health insurance provider, we’ll call it US Health. US Health operates in 48 states, and supplies all the Bronze, Silver, Gold and Platinum plans.

Their Bronze plan costs more in Los Angeles, Houston, New York City and Miami – around $150 per month. But in Nebraska, their Bronze plan costs only $90.

It all boils down to local costs of living, the average health of a local community, hospital and healthcare provider competition, the distance one might need to travel to reach emergency healthcare and many other factors.

Health insurers keep close track of all this data and use it to create their premiums.

As for how much health insurance costs, eHealth data indicates that in 2020 the national average premium costs without figuring in subsidies are as follows:

Individual health insurance cost is $456 a month;
Family health insurance cost is $1,152.

Who Decides How Much Private Health Insurance Will Cost?

Health insurance companies never take a random guess at premium pricing.

Insurers keep very detailed databases about healthcare costs and health risks (more on this in a moment).
They share this information with one another.

The individuals employed by insurers to do this research, seek patterns and ultimately set your private health insurance prices, are called actuaries. It’s a great job if you’re math-minded, and usually pays upwards of $50/hr.

Now, sometimes a specific region or community will have trends for specific health conditions. Eighty years ago, for instance, steel workers and ship builders on the East Coast were known to develop mesothelioma or other lung conditions related to their job.

A more modern example is the Flint Water Crisis in Michigan. While we don’t fully understand the future health implications for a community with unhealthy water, insurers know that people in certain communities are more likely to have conditions in the future. And they will raise premiums in that network of care providers accordingly.

Health insurance companies cannot deny coverage because of a condition, but they will place you in a risk group according to other personal information.

Factors that Determine Your Private Health Insurance Cost

Healthcare.gov states that five factors affect your health insurance costs.

These are:

Age
Location
Tobacco use
Individual vs. Family enrollment
Plan category (Bronze, Silver, and so on.)

It’s also vital to know the issues that do not affect your private health insurance costs.

These include (but are not limited to):

Gender
Medical history
Pre-existing conditions
Income or employment history
Race or national origin
Child support or alimony obligations

However, in many states, insurers can use your credit score when calculating your premium. This is a thought-provoking juxtaposition in health insurance pricing, that continues to drive much discussion. Many feel that a credit score should not be used to calculate a person’s healthcare premium. There are substantial arguments for both cases.But that’s an article for another day.