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What’s the average cost of health insurance?

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Health insurance coverage is vital, regardless of your age or condition. But the truth is that insurance costs can vary widely, 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 it's time to choose a health insurance company and policy. 

What influences employer-based health insurance costs?

Most people get their health insurance through an 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 in Bellevue, WA. “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.”

Employees often wonder -- why did my health insurance go up? 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, an Austin, TX-based 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.

A preferred provider organization (PPO) plan, which is the most common employer-sponsored health plan, usually costs more than a health maintenance organization (HMO) plan. Those 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. A deductible is what you pay 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 estimated the employees pay an average annual employer-sponsored premium of $1,186 for single coverage and $5,547 for a family plan. Family plan premiums cost more than $20,000 on average, but employers pay nearly $15,000 of that amount on average with the employee picking up the rest.

What influences ACA plan costs?

Individual health plans and plans on the Affordable Care Act’s Health Insurance Marketplacerequest 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 Minneapolis-based 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 health care 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.

The ones who tend to pay the most overall are older folks who don't yet qualify for Medicare - such as 64-year-olds, Darr says.

Franke says individual plan insurers can only charge an older person three times what it charges a younger person.

"For instance, in Seattle, a 64-year-old will pay 300% more than a 21-year-old for a Silver plan. That could mean the difference between paying about $900 per month versus $300 per month, respectively," Franke adds.

However, younger people tend to pay a higher relative premium every month for an ACA plan than what older people pay, 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.

Health insurance costs by age

Let’s take a look at health insurance costs by age. According to Franke, based on 2020 data provided by AM Better, the average monthly premium costs for a Gold, Silver, and Bronze health plan are:

AgeGoldSilverBronze
21$342$300$234
25$344$301$235
30$388$341$266
35$418$367$286
40$437$384$300
45$494$434$339
50$611$536$419
55$763$669$523
60$929$815$636
64+$1,027$901$703

How the health plan affects health insurance costs

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:

Bronze

  • Lower premiums than other ACA plans
  • Higher deductibles and out-of-pocket costs when you need care than the other ACA plans
  • Plan covers 60% of health care costs and you pay the other 40%

Silver

  • Higher premiums than Bronze, but lower premiums than Gold and Platinum
  • Higher deductibles and out-of-pocket costs than Gold and Platinum, but less than Bronze
  • Plan covers 70% of your health care costs and you pay the other 30%

Gold

  • Higher premiums than Bronze and Silver, but lower premiums than Platinum
  • Higher deductible and out-of-pocket costs than Platinum, but less than Bronze and Silver
  • Plan covers 80% of your health care costs and you pay the other 20%

Platinum

  • Higher premium than any other plan
  • Lower deductibles and out-of-pocket costs than any plan
  • Plan covers 90% of your health care costs and you pay the other 10%

eHealth reported that the average monthly premium of an ACA plan without subsidies is $456 for an individual and $1,152 for family coverage. Premiums haven’t grown much over the past two years.

Broken down by plan type, the average monthly premiums by metal level with no subsidies are:

  • Bronze -- $448
  • Silver -- $483
  • Gold -- $559
  • Platinum -- $732

How income affects health insurance rates

There’s another factor in what you pay for an ACA plan -- your income. If your household income doesn’t exceed 250% of the federal poverty level, you can qualify for subsidies that lower your monthly premiums. That’s about $32,000 for an individual and $65,000 for a family of four.

You can also get tax credits to help pay for health insurance if your household income is below 400% of the federal poverty level. That’s about $51,000 for an individual and $105,000 for a family of four.

Kaiser Family Foundation offers a tool that estimates health insurance costs for a marketplace plan.

How your state affects health insurance costs

Where you live and your state of residence can make a difference in what you pay for individual insurance and an ACA plan, too.

"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 their own decisions about insurance matters, including when to make special open enrollment periods available.

California offers more health insurance subsidies for ACA plans than other states. California provides subsidies to lower ACA plan premiums for people who make less than 600% of the federal poverty level. 

Health insurance costs in 2021

Health insurance cost increases have outpaced inflation for many years. That’s likely to continue.

"The extent of the increase will depend largely on factors that are unknowable right now, such as the degree of financial pressure health providers and insurers endure as a result of the current pandemic," says Martucci.

On the other hand, prices decreased in 2020 in some states, including Washington State, which saw a 4% price reduction, per Franke.

"From what I've seen, health care insurance prices should be decreasing nationally by about 4% in 2021, as well," he says. "This is good news and largely attributed to the fact that many insurance carriers have actually started to become profitable since 2019 and are, consequently, lowering prices."