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The Average Cost of Health Insurance

CarefulCents  | Ryan Friend | Sep 17, 2019

health insurance - The Average Cost of Health InsuranceOf all the types of insurance out there, health insurance is perhaps the most important. After all, without our health, it’s difficult to do much else in life. However, in the United States, which relies mostly on a private health insurance system, costs are high, and it’s often very confusing to know how much you can expect to pay.

This is because you can get health insurance in many different ways. You can buy it on your own, receive it from your employer as part of your compensation package, or get it from the federal government.

However, just because the world of health insurance is confusing, it does not mean you need to pay more than you should, and knowing the average costs of the many different types of health insurance can help you understand if your premiums are fair or if it’s time for a change.

Below we’ve outlined all the different factors that determine the cost of your insurance and also identified the average rates for the various options out there. In addition, you will find some tips to help you save on your insurance so that you can get the care you need at the best possible price.

Factors Affecting the Cost of Your Health Insurance

As you can see, health insurance is expensive. However, depending on your situation, what you actually pay for health insurance could be significantly less than what it actually costs.

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But on the other hand, you could be paying more than the national average. To help you make sense of your health insurance premiums, here is a breakdown of all the different factors that affect how much you pay.


Probably the biggest thing affecting how much you pay for health insurance are the subsidies you receive. For many people, these subsidies come from their employers and serve as a focal point of their benefits package. But how much your employer contributes to your healthcare plan varies from organization to organization. Some will pay almost your entire premium, whereas others will only cover a portion, meaning you will be expected to pay more of your own money.

Other subsidies come from the government. If you have a low income and/or a significant number of dependents, you may be eligible for either cheaper healthcare or tax credits that make your healthcare burden smaller.

These days, most government subsidies are doled out as a part of the Affordable Care Act (ACA, or, as we know it now, Obamacare).


How much you pay for health insurance will depend heavily on your deductible. As with other types of insurance, the deductible is the amount of money you will be expected to pay before your coverage kicks in.

When it comes to health insurance, though, your deductible can be in the thousands of dollars, which means you may end up paying for most of your healthcare bills out-of-pocket while still paying a monthly premium.

However, this is only the case when you choose a high-deductible healthcare plan, which does come with lower premiums, but at an obvious cost. Conversely, lower deductibles reduce your out-of-pocket expenses, but they also come with higher premiums.

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Clearly, when it comes to healthcare, there’s no cheap way to go. But for many, paying a higher premium for better coverage is often preferred as it reduces the risk of all of a sudden being left with an enormous medical bill you can’t pay.

Out-of-Pocket Maximums

After you reach your deductible, your insurance company will start to cover your healthcare expenses. But few if any plans will pay for every expense you incur beyond your deductible. Instead, they will contribute a percentage of the cost, and you will be responsible for the rest.

However, insurance plans come with yearly out-of-pocket maximums that limit how much you will have to pay. If you reach your deductible and out-of-pocket maximum, then any additional costs will be covered 100 percent, but this will come after you’ve spent a small fortune on healthcare.

Unfortunately, if you are buying individual insurance (more on this later), it’s likely your out-of-pocket maximum will be quite high because it is expensive for insurance companies to cover just one person. Managed-care plans (more is also coming later) tend to have lower out-of-pocket maximums, but these pans are more exclusive and usually require an employer to help you cover costs.


Insurance companies allow you to add dependents to your policy so that you can make sure not only you but your family members are covered. Typically, once you start adding dependents, you are on a “family” plan. There are usually limits to the number of people you can add to the policy (typically four), and then you will need to start paying more. But as you can expect, family plans, since they cover more people, are considerably more expensive than individual plans.


In the end, an insurance company is protecting you against risks to your health. And by nature, older people are at a greater risk of experiencing health problems than younger people. As a result, the older you get, the more expensive your insurance will be. To give you an idea, consider the average healthcare costs for the following age brackets:

  • Children under five – $2,725/year
  • Children and teenagers ages 5-17: $1,921
  • Adults aged 18-44 – $2,985
  • Adults 45-64 – $6,406
  • 65+ – $11,316

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Tobacco Use

As we’ll discuss later, insurance companies cannot deny you coverage or charge you more for pre-existing conditions. However, when it comes to tobacco use, insurance companies can and do charge smokers more.

This is because there is now so much evidence about the adverse health effects of smoking that insurance companies do not want to bear the extra risk of covering a chronic smoker. To give you an idea of how much tobacco can affect your insurance costs, consider that smokers pay 15-20 percent higher premiums than non-smokers.

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