This is one of the most common questions people ask when they start shopping for health care. Unfortunately, because health care isn’t a one-size-fits-all kind of thing, the answer is: it varies.
According to the Centers for Medicare and Medicaid Services, Americans paid $10,345, on average, for healthcare in 2016. That cost is expected to increase by 5.5% per year through 2026. But what does that mean for your personal health care cost in 2019? The total amount you’ll pay for health care depends on three factors:
- Your location
- Your age
- And the intersection between the amount of care you need versus the amount of care your insurance covers.
Factor #1: Your Location
When it comes to the cost of insurance, geography matters more than any other factor. Here’s why:
- Insurance is regulated on a state level. Some states choose to supplement the cost of health care for people earning below a certain income level, which could lower your monthly premium if you qualify, and some states (sometimes they’re the same states) have minimum coverage requirements. These minimum coverage requirements protect consumers from getting an insurance policy that doesn’t cover basic care.
- As a general rule, healthcare costs more in rural areas than it does in urban areas. This makes rural areas less attractive to health insurers and means fewer companies will cover people in these areas. The fewer insurers that are in an area, the less competition there is and the higher the premiums tend to be. In urban areas, where there is more competition, the premiums tend to be lower. If you’re curious about average premiums in your state for 2019, check out this interactive map from Consumer Reports. As you’ll see, Massachusetts has the cheapest average premiums at $329 per month and Wyoming has the most expensive at $863 per month.
Factor #2: Your Age
It’s an unfortunate fact that health insurance companies reward youth with lower premiums. They do this because younger people are assumed to be healthier, take fewer medications and are less likely to come down with a serious illness that will require expensive treatment, than older people.
What constitutes “older” in the insurance company’s eyes? Again, it varies, but on average, you’ll pay the lowest premiums under the age of 25. At age 30, you can expect your premium to increase, by an average of 13%. The smallest increases in premium usually occur between ages 30 and 40 (ranging between 5% and 7.5%), and then once you hit 45, you’ll likely see double digit increases in your premium every five years.
Factor #3: The Intersection Between the Care you Need and the Care Your Insurance Covers
In our article about health insurance costs, we outline the charges that will add up to your total cost of medical care for the year. These include: premium, deductible, co-pays, co-insurance and maximum out-of-pocket cost. ]
Your premium is what you pay each month (this doesn’t count toward your deductible or out –of-pocket max). Your deductible is the amount you need to pay before your insurance starts to cover your care. Your co-pay is what you must pay for each doctor or hospital visit (this doesn’t count toward your deductible or out-of-pocket max). Your co-insurance is the amount you’re responsible for paying even after you’ve met your deductible (this does count toward your out-of-pocket max). The out-of-pocket max is the most you will have to pay for medical care under your plan.
Why are these important? Well, different plans cover different percentages of care. For instance, one plan might cover 100% of your care after you’ve met your deductible, and with another, you might be responsible for 30% of the cost (aka co-insurance) after your deductible has been met. If your deductible is the same under both of these plans, the one which requires the 30% co-insurance could end up costing you more, depending on the premiums.
At the end of the day, you want to make sure your expected medical needs—these include prescriptions, tests and any specialist visits you know you’ll need—are adequately covered under your plan. If not, you could end up paying more for your medical care than you were expecting.
If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.
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.