What Is Considered a High Premium for Health Insurance?

A health insurance premium is the regular, typically monthly, payment made to an insurance company to maintain health coverage. It represents the cost of access to a plan’s benefits, whether medical services are used or not. This article explains the elements contributing to health insurance costs and defines what might be considered a substantial premium.

Understanding Health Insurance Premium Components

The premium paid for health insurance is only one part of the total cost an individual might incur for healthcare services. Beyond the regular premium, policyholders typically encounter other cost-sharing elements such as deductibles, co-payments, and co-insurance. A deductible is a predetermined amount of money an insured individual must pay for covered services before the insurance plan begins to pay. For example, if a plan has a $2,000 deductible, the policyholder is responsible for the first $2,000 of covered medical expenses in a policy year.

After the deductible is met, co-payments and co-insurance apply. A co-payment is a fixed amount paid for a specific service, like a doctor’s visit or prescription, with insurance covering the rest. Co-insurance is a set percentage of a covered service’s cost that the policyholder pays after the deductible. For example, with 20% co-insurance, the policyholder pays 20% of the bill, and the insurer pays 80%.

An inverse relationship often exists between premiums and cost-sharing. Lower monthly premiums frequently mean higher deductibles, co-payments, or co-insurance, leading to more out-of-pocket spending before full coverage. Higher premiums generally offer lower deductibles and cost-sharing, resulting in less expense at the point of service. While deductibles, co-payments, and co-insurance contribute to an individual’s annual out-of-pocket maximum, monthly premium payments do not count towards this limit. The out-of-pocket maximum is the most a policyholder will pay for covered services in a plan year, after which the plan typically covers 100% of additional costs.

Key Factors Influencing Health Insurance Premiums

Health insurance premiums are determined by several variables. One factor is the applicant’s age. Premiums generally increase with age, reflecting older individuals’ higher likelihood of requiring more medical care. The Affordable Care Act (ACA) limits how much more older adults can be charged compared to younger individuals, typically capping the ratio at 3:1, but a substantial difference in cost remains.

Geographic location also influences premium determination. Regional variations stem from healthcare costs, competition among insurers, and state and local regulations. Areas with a higher cost of living or fewer healthcare providers may have higher insurance costs. This means a policyholder in one zip code could pay a different premium than someone with an identical plan in a neighboring area.

Tobacco use is another factor influencing premiums. Federal guidelines permit insurers to charge tobacco users up to 50% more than non-tobacco users. This surcharge accounts for increased health risks and potential healthcare costs. Specific state laws may, however, impose their own limits or prohibit such surcharges, creating regional disparities.

Family size impacts premiums, as covering more individuals under a single plan increases the insurer’s risk pool. Premiums for a family plan will be higher than for an individual plan. While combining coverage can sometimes be more cost-effective than separate policies, the total premium scales with the number of people covered.

The type and structure of the health plan chosen also influence premiums. Different plan types offer varying levels of flexibility and cost:
Health Maintenance Organizations (HMOs): Typically have lower monthly premiums, often require a primary care physician (PCP) and referrals for specialists, and generally restrict coverage to in-network providers.
Preferred Provider Organizations (PPOs): Offer greater flexibility with broader networks and no referral requirements for specialists, but usually come with higher premiums.
Exclusive Provider Organizations (EPOs): Balance HMOs and PPOs, offering wider networks than HMOs without requiring referrals, with premiums often falling between them.
Point of Service (POS) plans: Blend aspects of both HMOs and PPOs, providing some out-of-network coverage at a higher cost.

Health plans are categorized into “metal tiers” under the ACA: Bronze, Silver, Gold, and Platinum. These tiers signify the plan’s “actuarial value,” representing the average percentage of healthcare costs the plan is expected to cover. Bronze plans have the lowest monthly premiums but cover approximately 60% of costs, resulting in higher out-of-pocket expenses. Silver plans cover about 70% of costs, Gold plans around 80%, and Platinum plans cover approximately 90%, with premiums increasing with coverage. This tiered system helps individuals choose a plan balancing monthly premium payments and potential out-of-pocket spending.

Benchmarking Health Insurance Premium Costs

To understand what constitutes a “high” health insurance premium, compare costs against average benchmarks. For an individual purchasing a plan through the Health Insurance Marketplace without subsidies, the average monthly premium in 2024 ranged from $456 to $497. In 2025, a Silver plan for a 40-year-old averages around $539 per month, while a comprehensive ACA plan could average about $590 monthly.

Family health insurance premiums are substantially higher due to increased coverage needs. In 2023, the average annual cost for a family of four was around $23,968. For 2024, employer-sponsored family coverage averaged $25,572 annually, with workers contributing approximately $6,296. For employer-sponsored plans, the average monthly premium was about $111 for individual coverage and $509 for family coverage in 2024.

Premiums also vary significantly based on the chosen metal tier, reflecting the plan’s actuarial value. In 2025, average monthly premiums for a 40-year-old on the Marketplace include:
Bronze plans: $380 to $495
Silver plans: $495 to $621
Gold plans: $510 to $676
Platinum plans: $540 to $1,166 (most comprehensive coverage, highest premiums)
Catastrophic plans: Around $361 (for eligible individuals, with very high deductibles)

Geographic location also varies premium costs across the country. In 2024, Alaska reported some of the highest average monthly premiums, around $948, while New Hampshire had averages closer to $323. For 2025, West Virginia had a high average Silver plan premium at $864, contrasting with Virginia’s lower average of $390.

When considering a “high” premium, also consider it relative to household income. Historically, health insurance costs, including premiums and deductibles, have consumed an increasing share of median income, reaching 11.6% in 2020. A general guideline suggests health insurance costs should not exceed 10% of annual income. Federal provisions for marketplace plans through 2025 cap the premium for a benchmark Silver plan at 8.5% of household income for eligible individuals. Ultimately, what constitutes a high premium depends on an individual’s financial situation, health needs, and perceived value of the coverage.