You might have heard of something called, “the pink tax”. It refers to the fact that women, whether or not they’re partial to the color pink, tend to pay more for goods and services marketed to them than goods and services marketed to men. Until 2009, the pink tax also applied to health insurance.
Before the American Care Act (ACA, aka Obamacare) was passed in 2009, only 13% of health plans available to a 30-year old, single woman living in a state capital included maternity benefits as part of their basic coverage. If your plan didn’t include maternity benefits and you wanted to get pregnant or were pregnant, you had to buy a separate policy that did. Health plans also charged more if you wanted coverage for birth control and were in the habit of charging non-smoking women more than they charge male smokers of the same age.
This all changed once the ACA became law and now health plans aren’t supposed to charge women more than men but starting in 2019, some insurers in some states might be able to find a way around this.
But before we get to that, let’s start with the basics.
The 5 Factors that Determine Your Premium
According to the ACA, insurers are allowed to take the following five factors into consideration when calculating your premium:
- Your location. Since healthcare is still a largely private enterprise that’s regulated on a state level, the cost of your health insurance is most dependent on where you live. As a general rule, healthcare costs more in rural states and areas than it does in urban ones. The bigger the population, the more likely you are to have multiple health insurance carriers in your area, and competition tends to lead to lower prices. Some state regulations and policies can also make health insurance more expensive for people in those states.
- Your plan tier. Health insurance plans are divided into tiers: Catastrophic coverage, Bronze, Silver, Gold and Platinum. Catastrophic coverage is the cheapest but covers the least amount of your care, specific coverage amounts varying widely by plan. Bronze plans typically cover 60% of your healthcare costs but have the next cheapest premiums. Silver plans typically cover 70% of your costs and are the next expensive, Gold plans cover 80% and Platinum plans cover 90% and have the highest monthly premiums.
People who make an annual income below 400% of the federal poverty line are eligible to receive federal subsidies to help them pay their premiums on Silver, ACA-compliant health plans. This can make a Silver plan cheaper than a Catastrophic plan for people who qualify
- Your age. Health insurance companies can and do charge older people up to 3x more than they charge younger people.
- Whether or not you smoke. Health insurers typically charge smokers more than non-smokers.
Numberof people covered. This is common sense: the more people (i.e. dependents) your plan covers, the more expensive it will be.
Average Cost for Health Insurance
If you’re a single 21-year old, here are the average monthly premiums you can expect based on different factors:
- Tier type:
- Catastrophic: $167
- Bronze: $201
- Silver: $247 (this is without government subsidies)
- Gold: $291
- Platinum: $363
- Plan type:
- HMO: $230
- POS: $244
- PPO: $251
- EPO: $254
- Alaska is the most expensive
- Utah is the least expensive
- You can find the average premium for your state here.
- Alaska is the most expensive
Changes in 2019
At the end of 2018, the Trump Administration gave new guidance to states on how they were allowed to apply their federal subsidies. Starting in 2019, states can choose to use federal subsidies to subsidize non-ACA-compliant, short term health plans instead of Silver health plans.
These short term plans often don’t offer coverage for maternity and newborn care, nor do they cover prescription drugs like birth control. They can also charge women more than men and deny coverage based on preexisting conditions. If your state chooses to subsidize these short term plans instead of Silver plans, your health insurance could get more expensive.
It’s important to remember that
Healthcare Cost Series
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.