Health Insurance Premium—What It Is & How It Works

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Health Insurance Premium Definition

Your health insurance premium is the fee you pay to buy your health insurance coverage. In most cases, you pay your health insurance premium monthly like you pay your rent and the electricity bill.

How You Pay Your Health Insurance Premium

How you pay your health insurance premium depends on the source of your health insurance. If you buy your health insurance through an Affordable Care Act health insurance exchange, in most cases, you’ll pay your health insurance premium directly to your health insurance company each month.

Most health insurance companies accept several methods of payment including

  • personal check,
  • money order,
  • cashier’s check,
  • electronic funds transfer from your checking account,
  • prepaid reloadable card.

Many insurers also accept premium payments by

  • credit card,
  • debit card,
  • wire transfer.

Health insurance companies require that premiums be paid in advance of the coverage. So, for example, you might be required to pay June’s premium by May 25th.

If you have health insurance through your job, your employer pays a portion of your health insurance premium each month, and you pay the remainder of the monthly premium. Your employer usually has your share of the monthly premium deducted from your paycheck automatically. This deduction is done before your income taxes are calculated, so the money you spend on health insurance premiums is income-tax free.

If you have COBRA continuation coverage, you’ll have to pay your health insurance premiums as directed in your COBRA election notice.

This usually means sending a monthly payment to your COBRA benefits administrator. However, if the employer through which you receive your COBRA coverage doesn’t contract with a COBRA benefits administrator, you may be required to send your COBRA payment directly to the employer’s benefits office or the health insurer.

How Much Does COBRA Health Insurance Cost?

The vast majority of people who have Medicaid don’t pay a monthly premium since Medicaid is a social welfare program for low-income people. However, in the unlikely event that your state has a special Medicaid waiver program requiring you to pay a small monthly premium for your Medicaid coverage, you’ll have to carefully follow the instructions that came with the coverage to determine how to pay the premiums.

What Happens if You’re Late or Don’t Pay Your Health Insurance Premium

If you’re late or don’t pay your health insurance premium, your health insurance coverage can be canceled. Whether or not you have a grace period, and if so, how long that grace period is varies depending on the source of your health insurance coverage. Grace periods can also vary depending on whether this is your first payment (known as effectuating coverage), or you’ve been with this health plan for some time and are late on an ongoing monthly payment.

If your health insurance is canceled because you didn’t pay the premium, you may have trouble getting health coverage back immediately.

For example, if your COBRA coverage is canceled, you cannot reinstate it, and cancelation due to non-payment of premiums doesn’t qualify you for a special enrollment period on Affordable Care Act health insurance exchanges. This means you may be uninsured until the next Obamacare open enrollment period, or until you’re next eligible to enroll in job-based health insurance.

Late Paying Your COBRA Insurance Premium? What Now?

Late Paying Obamacare Insurance Premiums? What You Need to Know

Help Paying Health Insurance Premiums

If you can’t afford to pay your health insurance premium, you may be eligible for help paying for health insurance that you buy on an Affordable Care Act health insurance exchange. The premium tax credit health insurance subsidy is available for people with incomes between 100% and 400% of federal poverty level.

In order to qualify, you must reside in the U.S. legally, and not be incarcerated. If you’re married, you won’t qualify for the health insurance subsidy if you use the married-filing-separately status when you file your federal income taxes. Married people must file jointly to be eligible for the subsidy unless a domestic violence situation prevents this.

How Does the Health Insurance Subsidy Work?

8 Things to Know About the Health Insurance Subsidy

What You Owe Doesn’t End With Premiums

What you’ll owe when you buy health insurance doesn’t end with premiums. You’ll still have to pay for health care expenses not covered by your health insurance. And, you’ll have to pay cost-sharing expenses when you use your health insurance.

Understanding Your Health Insurance Coinsurance—What You Need to Know

Copay-How Your Health Insurance Copayment Works

Deductible—What It Is & How It Works

What You Owe Your Health Insurance Company—Besides Premiums

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