What is a health insurance premium?
Just like the premium you may pay for car or life insurance, a health insurance premium is a regular payment you make to your insurance provider in exchange for the coverage you were approved for.
When you have workplace health benefits , the premium is often shared between you and your employer. When you have individual health insurance, however, you’re responsible for the entire premium.
Premiums are usually charged monthly or sometimes yearly.
How are health insurance premiums calculated?
The insurance company uses a process called “underwriting”, where they evaluate certain factors to calculate your premium. The factors they may use include:
- Your age: The older you are, the higher your premium is likely to be.
- Your health: Your medical history (including any conditions you’re actively receiving treatment for) can change how much you pay, or even mean you’re ineligible for certain plans.
- If the policy includes any dependants: Adding your kids or any other dependants will likely raise your premiums.
- What the plan covers: The more coverage your plan offers, the higher your premiums are likely to be.
Here are some examples for illustrative purposes of how premiums could be calculated for someone seeking coverage from Canada Life’s individual health and dental plans. Please note, situations will vary according to specific circumstances.
Tameka, 35
Tameka is a freelance illustrator who doesn’t have any individual health and dental coverage right now. She doesn’t take any medication and has no serious medical history. She’s looking for coverage for herself and her 2 kids, aged 3 and 7. They live in British Columbia. Depending on the amount of coverage she opts for, Tameka’s premiums could be:
- Select: $122
- Select plus: $210
- Select elite without dental: $199
Nancy, 45
Nancy has high blood pressure and takes medication to keep it in control. Getting prescription drug coverage to cover these costs, which increase every year, is the primary reason she’s looking for individual insurance. She’s also noticed her eyesight declining recently, so she’s looking for vision coverage as well. She’s a widow and doesn’t have any dependants. She hasn’t been covered by individual insurance since she went freelance as a dance instructor 10 years ago. She lives in New Brunswick.
- Because of her pre-existing high blood pressure, Nancy will be offered Select Guaranteed Acceptance. The monthly premium could be $197 per month.
Jim, 65
Jim is married, and about to retire from his job. He has rheumatoid arthritis and insulin dependent diabetes – both conditions that would make him ineligible for supplemental health and dental insurance. (Supplemental insurance refers to individual insurance you apply for when you are not currently covered by another individual, workplace or other group plan.) Fortunately, Jim is leaving a benefits plan which means he is eligible for continuing health and dental insurance. However, his two conditions will be “exclusions,” meaning his plan will not cover them. He lives in Ontario, and wants to make sure his husband, also 65, is covered by this plan too.
Depending on the amount of coverage he opts for, Jim's premiums could be:
- Select Guaranteed Acceptance: $348
- Guaranteed plus: $524
- Guaranteed elite: $749
How often do health insurance premiums increase – and why do they go up?
Health insurance premiums generally increase each year. This is due to factors like inflation but can also be caused by newer technologies or treatments. These give customers access to new and improved treatment options, but they may be more expensive for the insurer to cover, which can cause costs to rise. Another contributor to rising premiums may be more people making claims. These drive the costs for the insurer up, which in turn means you’ll pay more for your individual health and dental insurance.
What are copays and deductibles?
Along with premiums, there are 2 other expenses you may encounter when you sign up for individual health and dental coverage:
Copays
This is the amount you pay for covered services out-of-pocket. Your insurance will then cover the rest, up to the maximum amount outlined in your plan. For example: If you have dental coverage with PlanDirect™ Core, your insurance will cover 70% of the cost of your routine dental visit, up to $350 per person per calendar year. You are responsible for paying the remainder.So, if your checkup cost $100, that means you pay $30 out-of-pocket while your insurance covers $70.
Deductibles
This is a fixed amount you must first pay out-of-pocket each year before your health and dental insurance will begin to cover an expense. For example: If you have a $25 deductible for prescription drugs, you must spend $25 out-of-pocket on prescription drugs before your insurance kicks in to cover any eligible medications.