Health insurance costs vary depending on several factors, including how you get your health insurance.
Last updated: May 29, 2024 Compare quotes in less than 5 minutes
Written by Nupur Gambhir
Managing EditorNupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.
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Health insurance coverage is vital, regardless of age or health. However, insurance costs can vary depending on several factors, including how you get your health insurance.
By learning more about how insurers determine their rates, you can be better informed when choosing a health insurance company and policy.
Most people get their health insurance through their employer.
When determining health insurance premium quotes, health insurers gather information from employers, including employee ages, the employer’s industry and the past year of employee medical claims.
"They generally consider the average age and gender of the employee,” says Gary Franke, owner of Achieve Alpha Insurance. “For example, women in their childbearing years are more expensive to insure but so are older men in their 50s or 60s, who are more prone to having a heart attack, stroke or other major issues.”
If your health insurance went up, this might be why. Employer plan premiums tend to increase year-over-year based on the prior year's expenses.
“So if your employer group is healthier than average in the prior year, the monthly price you and your employer will pay will go up by less," adds Franke.
Group plans are also commonly priced using "composite rate quoting," according to Marshall Darr, vice president of marketing and a licensed broker with Decent, a health insurance administrator.
"An employer submits the ages for all employees and their dependents. The carrier then provides a single rate that averages out the risk across the company, so that everyone pays the same," Darr explains. "But companies that skew older will have more expensive premiums."
The type of health plan also influences costs, including premiums and deductibles.
The most common employer-sponsored health plan is a preferred provider organization (PPO) plan, which usually costs more than a health maintenance organization (HMO) plan. PPO plans often have similar deductibles.
Meanwhile, a high-deductible health plan (HDHP) usually has much lower premiums than PPOs and HMOs, but much higher deductibles. You pay a deductible for health care services before a health plan chips in. A high deductible means you’ll pay more when you need care than if you had an HMO or PPO.
Another factor that goes into employer-sponsored costs is how much the business pays. Employers usually pay more than half of health insurance premiums, but that can vary.
Kaiser Family Foundation (KFF) estimated in 2023 employees paid an average annual employer-sponsored premium of $1,735 for single coverage and $6,575 for a family plan. Family plan premiums cost almost $24,000 on average, but employers paid nearly $17,000 of that amount on average with the employee picking up the rest. KFF does not have estimates for 2024 yet.
Individual health plans and plans on the Affordable Care Act’s Health Insurance Marketplace request key information from people when determining health insurance costs.
"Health insurance costs will vary significantly depending on your age, geography, family status and tobacco use," notes Brian Martucci, a personal finance expert with Money Crashers.
Plans can’t reject you or charge higher rates because of pre-existing conditions. The ACA ended that practice.
"Generally speaking, young, healthy non-smokers enjoy the lowest health insurance premiums, while older adults pay more – especially on the individual market," says Martucci.
Chris Orestis, the president of Life Care Xchange and a nationally recognized healthcare expert, echoes those thoughts.
"Our current system rewards people for being younger and healthier in both group or individual coverage. But the differences are much starker for individual coverage," says Orestis.
Darr says the ones who tend to pay the most overall are older folks who don't yet qualify for Medicare – such as 64-year-olds.
Franke says individual plan insurers can only charge an older person three times what it charges a younger person.
However, younger people tend to pay a higher relative premium every month for an ACA plan than older people, Franke notes.
"The problem is that younger people, in general, are more likely to go without insurance, since it is expensive relative to the cost. ACA insurance carriers need more younger people to even out the expenses of older people, so they charge younger policyholders more than they should be paying," says Franke.
The type of plan you choose also influences ACA plan costs. People with ACA plans through the Health Insurance Marketplace can choose a Platinum, Gold, Silver, or Bronze plan. The plans differ by premiums and out-of-pocket costs.
Here are the differences:
The KFF reported that in 2024 the average monthly premium of an ACA plan without subsidies is $477 for an individual.
Broken down by plan type, the average monthly premiums by metal level with no subsidies are:
There’s another factor in what you pay for an ACA plan – your income. You can qualify for subsidies that lower your monthly premiums based on your income compared to the federal poverty level (FPL). As of 2024, the calculation works on a sliding scale. If your income is 250% FPL, you must only pay up to 4% of your household income toward healthcare premiums. The 250% FPL benchmark in 2024 is $36,450 for an individual and $75,000 for a family of four.
If your FPL is 400% or higher, you pay no more than 8% of your household income on healthcare premiums. In 2024, 400% FPL is $58,320 for an individual or $120,000 for a family of four.
Kaiser Family Foundation offers a tool that estimates health insurance costs for a marketplace plan.
Where you live and your state of residence can also affect what you pay for individual insurance and an ACA plan.
"Many states have taken steps in recent years to stabilize their internal health insurance markets and drive down premiums," Martucci says. "For instance, at least 10 states – including Minnesota, Oregon, New Jersey, Maryland and Wisconsin – have established or applied to establish reinsurance funds that cover a portion of high-cost claims, easing the burden on insurers."
Darr adds that states also run their own health insurance exchanges and can make decisions about insurance matters, including when to make special open enrollment periods available.
