Why Is Health Insurance So Expensive?

Understanding how your health insurance costs are determined can help you decide if your current health insurance policy will cover your needs or whether you should start shopping around for a new policy.

What Affects Your Health Insurance Premium?

Legally, health insurance companies can only use certain factors when setting your health insurance premium, and these factors may be limited based on how you buy your insurance. When buying insurance on a public option marketplace or individually, insurers may consider:

• Your age – Older individuals usually pay more for health insurance than younger people.
• Your location – State laws, the availability of healthcare services, and local competition among health insurance companies can affect how much you pay.
• Tobacco use – If you smoke or chew tobacco, you will likely pay more for health insurance.
• Who is covered – If family members are included in your plan, you will pay more.
• The type of plan you select and its coverages – Health insurance companies may offer various types and tiers of health insurance coverage. Cheaper plans may offer less coverage than more expensive plans or may allocate more of the cost to care to you. This means higher deductibles, larger co-pays, and sometimes limits to the healthcare professionals you can see.¹

It is also worth noting that your health insurance company cannot use your gender, race, or medical history to deny health insurance coverage or to increase premiums. This means that if you have a pre-existing condition – a medical condition you have before you start a new health care plan – you cannot be denied coverage or charged more. The only exception is for individual plans – those purchased by one person, not as part of a group – purchased prior to March 23, 2010.

Almost half of people get insurance through their employers². In many of these cases employers help pay a portion of the health insurance costs as a benefit of employment meaning you would likely pay less than if buying insurance on your own.

When people buy insurance through their employers or as part of other groups, insurers may determine premiums by averaging out an entire employee population. Thus, premiums are the same for every employee based on the coverage plan they choose. In these cases, age and location may not affect the premiums that you pay, but tobacco use might. This depends on the agreement an insurer makes with the organization buying the policy.

What Affects Other Out-of-Pocket Expenses?

There are other costs associated with care, including health insurance deductibles, copays, and out-of-network costs. If you have a relatively low premium, you may need to pay more out-of-pocket expenses. A higher premium usually means you'll have fewer out-of-pocket expenses.

Likewise, the size of your health insurance deductible is usually affected by your premiums. A lower deductible generally means higher premiums. A higher deductible can save you money on premiums, but you may need to pay more out-of-pocket for care if you become sick or injured.

The same goes for copays (or copayments) and coinsurance costs. Higher premiums usually mean lower coinsurance and copays, whereas lower premiums may mean that you will pay more out-of-pocket expenses if you become sick or injured.

What Affects the Amount You Pay for Healthcare?

Even with health insurance the amount you will pay for healthcare depends on many factors. Your out-of-pocket cost is usually affected by:

• The Price Your Provider Charges. The cost of your care is set by the care provider, such as a doctor's office, the hospital emergency room, or an urgent care facility. Your insurance company can negotiate prices with care providers, which is usually less than prices people would pay on their own.
• Where You Seek Care. While emergency room visits are more expensive, hospitals are better equipped to treat serious conditions such as heart attacks, strokes, or severe burns. Urgent care centers may generally offer faster and less expensive treatment for non-life-threatening conditions like fevers, minor cuts, or broken bones.
• The Type of Disease Being Treated. Some diseases are more expensive than others. Severe chronic conditions like diabetes or heart disease can cost more than less serious illnesses or issues.

If you don't have health insurance, some doctors and hospitals may be willing to put you on a payment plan or negotiate the price of services. Talk to your care provider's billing department to understand your options.

Now that you have some basic information about healthcare costs, you can decide if you're paying the right amount for your health insurance and care.

Managing Healthcare Costs with the CareCredit Credit Card

If you are looking for an option to help manage your medical bills, consider healthcare financing with the CareCredit credit card. The CareCredit card can help you pay for the care you want and need and make payments easy to manage.* Apply today and use our Acceptance Locator to find a provider near you that accepts CareCredit. Continue your wellness journey by downloading the CareCredit Mobile App to manage your account, find a provider on the go, and easily access the Well U hub for more great articles, podcasts, and videos.

Our Expert Reviewer

Patty Caballero and her team of consultants together have more than 35 years of health insurance knowledge working for some of the biggest health insurance companies in the US. She has knowledge in building brands and strategic initiatives to help consumers better understand their health benefits.