What Is a Health Insurance Premium?

What is a health insurance premium?

A health insurance premium is the recurring payment you make to keep your health insurance in effect.

Think of your premium as the cost of having insurance—not the cost of receiving medical care.

Whether you use healthcare services frequently or not at all, you generally must continue paying your premium to maintain your coverage.

Premiums vary based on factors such as:

• The type of health plan.
• Your age (where permitted by law).
• Where you live.
• Whether you have individual, family, or employer-sponsored coverage.
• Whether you qualify for financial assistance.

How does a premium work?

Most health insurance plans require you to pay a premium on a regular schedule.

Depending on your coverage, premiums may be:

• Deducted from your paycheck by your employer.
• Paid directly to an insurance company.
• Paid through a Health Insurance Marketplace® plan.
• Withheld from Social Security benefits in certain Medicare situations.

If premiums are not paid on time, your coverage may lapse or be terminated after any applicable grace period.

Who pays health insurance premiums?

How premiums are paid depends on the type of coverage.

Employer-sponsored health insurance

Many employers pay part of the premium while employees pay the remaining share through payroll deductions.

Marketplace health insurance

Individuals generally pay premiums directly to their insurance company. Eligible households may qualify for premium tax credits that reduce the monthly cost.

Medicare

Most people do not pay a monthly premium for Medicare Part A if they meet federal work history requirements. However, most beneficiaries pay a monthly premium for Medicare Part B, and additional premiums may apply for Part C (Medicare Advantage) and Part D prescription drug coverage, depending on the plan.

Medicaid

Most Medicaid beneficiaries do not pay monthly premiums, although some state Medicaid programs may require premiums or similar cost-sharing for certain groups.

Premium vs. deductible

These two terms are often confused.

Premium

The amount you pay to keep your health insurance coverage active.

Deductible

The amount you generally pay for covered healthcare services before your insurance begins sharing many medical costs.

Paying your premium does not satisfy your deductible.

Premium vs. copayment and coinsurance

A premium is different from the costs you pay when receiving medical care.

Premium

• Paid regularly to maintain insurance coverage.
• Required whether or not you receive healthcare.

Copayment

• Fixed dollar amount for certain covered healthcare services.

Coinsurance

• Percentage of the covered cost you pay after meeting your deductible.

Many health plans require all three types of payments.

Does your premium count toward your out-of-pocket maximum?

No.

Monthly health insurance premiums generally do not count toward your deductible or annual out-of-pocket maximum.

Your out-of-pocket maximum typically includes eligible deductibles, copayments, and coinsurance for covered in-network services—not your premium.

Can premium tax credits reduce your premium?

Yes.

People who purchase health insurance through the Health Insurance Marketplace® may qualify for premium tax credits if they meet income and other eligibility requirements established under federal law.

These tax credits reduce the amount you pay each month for Marketplace coverage.

Eligibility depends on factors such as household income, family size, and access to other qualifying health coverage.

Why this matters

The monthly premium is only one part of the total cost of health insurance. A plan with a low premium may have a higher deductible or higher out-of-pocket costs, while a plan with a higher premium may provide lower cost-sharing when you need medical care. Comparing the full cost of coverage—not just the premium—can help you choose a plan that fits your healthcare needs and budget.