How much will an ACA plan cost me?

What factors determine the monthly premiums I will pay for an ACA health insurance plan?

The monthly premiums you pay for an ACA health insurance plan depend on several factors related to your personal circumstances, the type of plan you select, and where you live. The ACA Marketplace uses a standardized system to calculate premiums, but these factors can affect how much you’ll ultimately pay for coverage. Here’s an overview of the key factors that determine your monthly premium:

1. Age

• Age is one of the most significant factors affecting your ACA premium. Generally, older adults pay higher premiums than younger individuals because they are statistically more likely to need medical care.

• The ACA allows insurers to charge older enrollees up to three times more than younger ones. This means that someone in their 50s or 60s may have significantly higher premiums than someone in their 20s or 30s.

2. Location (Geography)

• Your location plays a major role in determining your premiums. ACA plans are priced based on regional healthcare costs, and the price of insurance varies by state, county, and ZIP code.

• Areas with higher medical costs, fewer healthcare providers, or less competition among insurers tend to have higher premiums.

• For example, residents of rural areas often face higher premiums compared to those living in metropolitan regions with more healthcare options.

3. Tobacco Use

• Tobacco use affects your premium. Insurers are allowed to charge tobacco users up to 50% more than non-tobacco users.

• If you are a smoker or use other tobacco products, your monthly premiums will likely be higher than those of a non-smoker with the same age, location, and income.

4. Plan Category (Metal Tier)

ACA plans are divided into four metal tiers: Bronze, Silver, Gold, and Platinum. The category you choose will affect your premium as well as how much you’ll pay for out-of-pocket costs like deductibles and copayments.

• Bronze plans have the lowest premiums but highest out-of-pocket costs. These plans are ideal if you want to keep your monthly costs low and don’t expect to need a lot of medical care.

• Silver plans have moderate premiums and out-of-pocket costs, and they are often the best value for individuals who qualify for cost-sharing reductions (CSRs).

• Gold and Platinum plans have higher premiums but offer lower out-of-pocket costs, making them a good choice if you expect to need frequent medical care.

5. Income and Subsidies

If your income falls within certain guidelines, you may qualify for premium tax credits, which can significantly reduce the amount you pay in monthly premiums. These subsidies are based on your household income and are available to individuals and families with incomes between 100% and 400% of the federal poverty level (FPL).

• Premium tax credits are designed to cap the amount you spend on premiums to a certain percentage of your income, depending on where your income falls on the federal poverty level scale.

• For example, in 2024, if your income is below 400% of the FPL (about $58,320 for an individual and $120,000 for a family of four), you may be eligible for premium tax credits.

• Recent changes to the ACA have also temporarily extended subsidies to those with incomes above 400% of the FPL, capping premiums at 8.5% of income.

6. Household Size

• The number of people in your household also affects your premium. When applying for an ACA plan, you’ll be asked to provide information about the size of your household, which includes you, your spouse (if applicable), and any dependents.

• Your household size and combined income are used to determine your eligibility for premium tax credits and cost-sharing reductions, which can lower your overall premium costs.

7. Plan Type (HMO, PPO, EPO)

The type of plan you choose—whether it’s an HMO (Health Maintenance Organization), PPO (Preferred Provider Organization), or EPO (Exclusive Provider Organization)—can also impact your premium.

• HMO plans usually have lower premiums, but you’re required to stay within a network of providers and may need referrals to see specialists.

• PPO plans offer more flexibility by allowing you to see both in-network and out-of-network providers, but they typically come with higher premiums.

• EPO plans are a hybrid between HMO and PPO, with mid-range premiums, but they also require you to stay in-network for services.

8. Cost-Sharing Reductions (CSRs)

If your income is between 100% and 250% of the FPL, you may qualify for cost-sharing reductions (CSRs). While CSRs don’t directly affect your premium, they reduce your out-of-pocket costs like deductibles, copayments, and coinsurance when you enroll in a Silver-level plan.

• If you qualify for CSRs, choosing a Silver plan might provide the most value, as it will reduce your out-of-pocket costs without significantly increasing your premium.

9. Health Insurance Provider and Competition

The insurer you select also plays a role in determining your premium. Different health insurance companies set their own prices based on their own negotiated rates with healthcare providers and their overall costs.

• In areas with more competition among insurers, premiums may be lower because companies compete for business. In regions with fewer insurers, premiums tend to be higher.

Summary of Factors that Influence ACA Premiums:

FactorImpact on PremiumAgeOlder individuals typically pay higher premiums.LocationPremiums vary by state, county, and ZIP code based on regional healthcare costs.Tobacco UseTobacco users may pay up to 50% more in premiums.Plan CategoryBronze plans have lower premiums; Gold and Platinum have higher premiums but lower out-of-pocket costs.Income and SubsidiesPremium tax credits based on income can reduce monthly premiums.Household SizeLarger households may qualify for more subsidies, lowering premiums.Plan Type (HMO, PPO, EPO)HMOs typically have lower premiums, while PPOs offer more flexibility at a higher cost.Cost-Sharing ReductionsOnly available with Silver plans, can reduce out-of-pocket costs for eligible individuals.Insurer CompetitionAreas with more insurers tend to have lower premiums due to competition.

Key Takeaways:

• Factors like age, location, tobacco use, and plan type influence the amount you’ll pay for your monthly premium.

• Your income and household size can qualify you for premium tax credits, which lower your premiums.

• Choosing the right plan tier (Bronze, Silver, Gold, or Platinum) and considering cost-sharing reductions can help you balance premiums and out-of-pocket costs.

For personalized help estimating your premiums and exploring subsidy options, schedule an appointment with a Tsunami Advisor here: Schedule an Appointment.