How Much Does Individual Health Insurance Cost?

When it comes to shopping for health insurance, there’s a lot to think about. However, one of the most important factors for many is cost. If you are looking to buy an individual health insurance policy, you want to know how the cost stacks up to other options, and whether there are ways you can save money without sacrificing coverage.

What You Need to Know

An individual health insurance policy may be your best option if you are self-employed or don’t qualify for coverage under an employer’s group plan.¹ It could also be less expensive than other options. For example, suppose you recently lost your job. In that case, you may be eligible for health insurance under the Consolidated Omnibus Budget Reconciliation Act (COBRA). This federal law lets workers and their families continue to receive health benefits through their former employer.² However, COBRA can be expensive, as you typically have to pay up to 102% of the cost of premiums.³ 

Keep in mind that some states require you to have health insurance or they will charge a penalty when you file your state tax return.⁴  

Though the name implies otherwise, you can buy an individual health insurance policy that covers your family in addition to yourself.⁵ 

The cost of your policy will depend on the type of plan you purchase, the insurance carrier who provides that plan, where you live, and whether the policy is just for yourself or for your entire family. Other factors include your age and whether you use tobacco products.⁶  

What Is Individual Health Insurance? 

Individual health insurance is coverage you buy for yourself and your family that does not come through an employer or other type of group coverage.⁷  

Suppose you are shopping for an individual plan. In that case, one option is major medical insurance, which covers a wide range of healthcare services, ranging from routine doctor visits to care for chronic conditions. Under the Affordable Care Act, or Obamacare, major medical insurance must cover certain essential health benefits, which include preventive care services such as an annual checkup, pregnancy and maternal care, emergency services and hospitalization.⁸

How Much Does Individual Health Insurance Cost?

While having access to a full-featured health insurance plan can bring about peace of mind, it comes at a cost.

Average Monthly Premiums (2020)

• Single 27 year old: $388⁹ 
• Family of four: $1,520¹⁰

Of course, different insurers charge different rates. The actual cost depends on how many people you are getting coverage for and the ages of those being covered and whether or not they use tobacco products. Where you live also can affect the cost, as some states have higher rates than others.¹¹ Also, if you’re purchasing coverage on the Exchange, the plan category – the level of coverage typically designated as Bronze, Silver, Gold or Platinum¹² – affects the price.¹³ 

For example, let’s look at a 40-year-old man from Dallas who does not use tobacco:

• $399.40 per month for a Silver PPO Plan with a $3,300 deductible from BlueCross BlueShield of Texas.¹⁴
• $798.80 per month if he adds his 40-year-old wife, who does not use tobacco.¹⁵
• $1,276.96 per month if the couple adds their two children to the policy.¹⁶ 
• $1,386.96 per month if the couple adds their two children to the policy and the wife uses tobacco — an increase of $115.58 per month.¹⁷

What Are the Specific Costs Involved?

There are a number of costs associated with individual health insurance that you may have to pay, depending on the type of policy you have. 

• A premium is the amount you pay your insurance carrier each month.¹⁸ 
• A deductible is the amount of money you must pay out of your pocket before your insurance begins to pay a benefit.¹⁹ 
• A copayment is a flat dollar amount you may have to pay for certain services (for example, a doctor’s visit or a prescription)
• Coinsurance is a percentage of covered health services that you are responsible for paying for once you’ve met your deductible.²⁰ 
• An out-of-pocket maximum is the total amount of money you may have to pay for healthcare services in a particular plan year. (After you reach this amount, the plan will cover your remaining eligible expenses in full.)²¹

In some cases, a person may have to pay each of these costs. For example, a consumer may have a healthcare plan with a $1,000 deductible that costs $300 in monthly premiums.  After he’s met his deductible, he may have to pay $50 for a doctor’s office visit and  30% of the cost for any laboratory services.  The good news is this consumer knows his total out-of-pocket costs will be capped by his out-of-pocket maximum in case he becomes seriously ill or injured. 

How Do You Choose a Plan That Meets Your Budget and Needs? 

To settle on the right plan, think about how you (and your family) typically use healthcare services. For example, ask yourself:

• How often do you usually visit the doctor? Once a year for a checkup, or monthly to monitor a health condition? Was last year typical, or unusual?
• Are you expecting larger-than-average health expenses  next year or do you only expect to use preventive care services? For example, are you having a baby? Were you recently diagnosed with a condition that will require regular treatment?
• What (and how many) prescriptions do you take regularly?
• How many healthcare providers do you typically see? Just a primary care doctor, several specialists over the year, or just the provider at your local retail or urgent care clinic?
• Do you and your family have one or more chronic health conditions?
• Have you or any of your family members been diagnosed with COVID-19 in the past year?
• Have you postponed healthcare services because of COVID-19?

It may be helpful to add up what you spent last year, just as a general guideline. 

Make sure you look at all costs, not just the premiums. For example, a high-deductible plan can work out to your advantage if you are relatively healthy and only expect only to use preventive care services, since those services are at 100%. These types of plans typically have lower premiums. However, if you have a chronic condition that requires a lot of care, you might consider a plan that has a higher premium but lower out-of-pocket costs. 

How Can You Save Money on Health Insurance Costs? 

If the cost of health insurance seems too steep for you, there are ways you can minimize the costs. 

Under Obamacare, you may qualify for a subsidy, or premium tax credit that lowers the amount of money you must pay each month if your income falls below a certain level.²²  If you are eligible for a subsidy, the amount you qualify for is based on how your income compares to the federal poverty level. 

You can also purchase supplemental health insurance, which can cover some of your out-of-pocket costs such as deductibles and coinsurance.²³  

If you are self-employed and have a high deductible health plan (HDHP), you can open a health savings account (HSA) or a medical savings account (MSA)²⁴  that lets you save pre-tax dollars to pay for qualified medical expenses.²⁵

Next Steps

If you choose to buy individual health insurance, you can buy it through the Health Insurance Marketplace–established by the Affordable Care Act to sell insurance plans to individuals and small businesses ²⁶ — or through a health insurance provider, broker, or agent.  

Before deciding on a plan, do an honest assessment of your health needs as well as your budget. After all, saving money on premiums won’t do you any good if your plan does not cover the healthcare services you need. 

Also don’t be afraid to ask for help from a broker or an exchange navigator as you sort through your different options, rather than relying on friends and family members. Healthcare is a complicated subject, and you need an objective resource who’s an expert on the topic. Remember, you don’t have to figure it out on your own.