A good rule of thumb for how much you spend on health insurance is 10% of your annual income. However, there are many factors to consider when deciding how much to spend on health insurance, including your income, age, health status, and eligibility restrictions. In 2020, the average national cost for health insurance was $456 for an individual and $1,152 for a family per month.
Now with Mira, the answer can be $0! Health coverage is out of reach and sometimes unnecessary for people with minimal healthcare needs. Mira is a health insurance alternative to help you access low-cost urgent care visits, lab testing, and discounted prescription drugs for as low as $25 per month.
Determining How Much You Should Spend on Health Insurance
The amount you should spend on health insurance depends on a few different characteristics of health insurance plans: the deductible, premium, and cost-sharing mechanisms. Generally, plans with higher monthly premiums have lower deductibles and less cost-sharing. There are four tiers of health insurance plans available on the Marketplace:
Health Insurance Costs by Tier of Plan
|Plan Tier||2021 Monthly Premium||Percentage of costs covered by the plan||Who it's best for|
|Catastrophic||$313/month||100% after out of pocket maximum is reached||Those who only want coverage in case of an emergency|
|Bronze||$387/month||60%||Healthy people who do not go to the doctor often|
|Silver||$539/month||70%||People who qualify for tax credits|
|Gold||$594/month||80%||People who often seek medical care|
|Platinum||$709/month||90%||Those who use a lot of care and can afford a high monthly fee|
John Bartleson, the owner of Health Benefits, helps answer this question. He explains, "The amount you should spend on health insurance depends on usage. To determine how much you should spend on health insurance, you need to consider how you've used your insurance over the past 18 months. Asking yourself how many times you need to see a physician or what kind of procedure you may need will help focus your search.
For example, you may know you need to see your doctor throughout the year and plan for a near-term procedure. In this scenario, it's best to get a plan with lower max out-of-pocket costs, even though the monthly premiums are more expensive. Likewise, if you are relatively healthy and you don't have any ongoing medical conditions, it's probably best to get a plan that has a low monthly premium but higher out-of-pocket costs."
How much you should spend on health insurance is subjective. It depends on how much you value health, your health status, age, income, and eligibility restrictions. John Millen from MillenGroup suggests, “A good rule of thumb is that you should spend about 10% of your annual income on the cost of single coverage (annual). This is actually the threshold that was established when the affordable care act started in 2008.""
How Much Millenials Should Spend on Health Insurance
If you don’t seek frequent health services, you may only need to be covered by health insurance in case of emergency. The amount you should spend on health insurance depends on the type of coverage you want.
Below we outline two options to get health insurance for millennials.
Catastrophic Health Insurance
Catastrophic health insurance is a good option for millennials because they have inexpensive premiums and limited healthcare coverage. If you are under 30 years old, you can find these plans on the Marketplace and expect to pay $173 per month on average to be protected in case of emergency.
However, it is important to note that these plans have very high deductibles, meaning that they will not cover any healthcare expenses until you spend approximately $8,000. Therefore, if you have not met your deductible, you will be responsible for covering the full cost of health care expenses.
Health Insurance Alternatives
Instead of purchasing an annual health insurance plan, many millennials have been joining care membership plans like Mira. These plans offer discounted health services when you need them, without a deductible.
In addition, many millennials choose to use Mira in addition to a catastrophic health plan. Coupling Mira and a catastrophic plan ensure that you get access to low-cost preventative and urgent care even before meeting your deductible on your catastrophic plan.
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How Much Employees Should Spend on Health Insurance
Employer-sponsored health insurance covers nearly half of all Americans. These health insurance plans are offered as a benefit of employment to employees and their dependents (and in most cases, spouses).
The premium for the health insurance plan offered by an employer is split between employer and employee. The average monthly employee contribution is $104 for single coverage and $466 for family coverage but differs by employer size. Below is a graph depicting the percentage of health insurance premiums employees pay for single or family coverage at small versus large firms.
The amount you should contribute towards your premium also depends on your state of residence. Below we outline the average premium that employees pay in each state when covered by employer-sponsored health insurance.
Average Insurance Premium for Employees by State
|Location||Annual Employee Contribution||Monthly Premium|
|District of Columbia|
Source: Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends. Medical Expenditure Panel Survey (MEPS)- Insurance Component, 2013-2020; Tables II.C.1, II.C.2, II.C.3 available at: Medical Expenditure Panel Survey (MEPS).
How Much People 55+ and Older Should Spend on Health Insurance
People 55 and older may want to allocate a bit more money towards their healthcare as accidents become more likely and the risk of chronic health conditions increases. Allocating more money towards your health insurance will likely save you money in the long run if you get sick or need medical attention.
Below we outline two ways that older adults can get coverage and how much they can plan to spend.
Private Health Insurance Plans
Private health insurance plans are sold both on and off of the Health Insurance Marketplace. If you qualify for subsidies from the government, you can use them towards the monthly premium of on-exchange plans.
Off of the Marketplace, private health insurance plans can be purchased from a private insurance company or broker. There are usually more options off of the exchange, but they can be more expensive. For unsubsidized, private health insurance plans, individuals aged 55 to 64 pay $799 per month on average.
Medicare is an option for individuals over 65 years old. Medicare Part A is free hospital insurance for those who qualify. To qualify for Medicare Part A without having to pay a premium at age 65, you must:
- Be receiving retirement benefits from Social Security or the Railroad Retirement Board.
- Be eligible to receive Social Security or Railroad benefits but you have not yet filed for them.
- You or your spouse had Medicare-covered government employment.
There is also Medicare Part B, which is medical insurance. The standard Part B monthly premium amount in 2021 is $148.50 but is adjusted by income.
Health Insurance Spending Frequently Asked Questions (FAQs)
The amount you should spend on health insurance varies on a case-by-case basis. It depends on the level of coverage you need given your age and health status, but also on the amount you are able to pay. Regardless of the need, health insurance is extremely expensive, so we offer some cost-saving tips below.
Virtual care for only $25 per visit
Virtual primary care, urgent care, and behavioral health visits are only $25 with a Mira membership.
How can I save money on healthcare?
Bartleson says, "don'tI always suggest looking into a strategy that I call 'stacking' to save money on health insurance. First, start by selecting a high deductible health plan with a low monthly premium. Next, use some of the premium cost savings to purchase a secondary plan. The result is a lower overall monthly premium, lower overall out-of-pocket costs, and great coverage for the family/individual."
Mira and other health insurance alternatives are great "secondary plans". These memberships offer immediate, transparent benefits without the hassle.
How can I lower my health insurance premium?
There are several ways to find a health insurance plan that fits your lifestyle and budget. To begin, you can see if you qualify for a government subsidy. The Advanced Premium Tax Credit subsidy lowers your monthly premium payment, and the Cost-Sharing Reductions program can lower the cost-share amount you pay for medical care; there are tools you can use to see if you qualify based on your premium.
Another option is to see if you're eligible for Medicaid. Every state has its own Medicaid program to provide affordable health insurance coverage to low-income individuals and families. Contact your state's health department to see if you are eligible.
You can also enroll in a catastrophic or bronze-tiered plan to have a lower premium, but remember, this means you will likely have a higher deductible.
What if I want dental coverage?
If you have medical insurance that doesn’t cover dental service, you can purchase standalone dental insurance. Typically, dental insurance premiums can range from $25-$50 per month. Dental insurance is important if you think you might need dental procedures in the future. Cleanings, crowns, bridges, and implants are usually covered and can be quite expensive without insurance.
Stand-alone PPO dental insurance plans usually use a 100/80/50 coinsurance structure. This means:
- 100% coverage for preventive care including cleanings, exams, and X-rays
- 80% coverage for basic procedures, such as fillings
- 50% coverage for major procedures, such as crowns and dentures
How do I get vision coverage?
All health insurance plans on the marketplace include vision coverage for children, but only some include vision coverage for adults. Vision insurance helps cover the costs of annual eye exams, glasses, and contacts but will usually not cover elective surgeries like LASIK. Each plan is a little bit different, so be sure to check your coverage before seeing an ophthalmologist.
You can purchase stand-alone vision coverage online or through an insurance agent. The MarketplaceMarketplace does not offer stand-alone vision plans. You should expect to pay between $5 and $15 per month for vision insurance.
What are health care memberships?
Health care memberships can serve as an alternative to health insurance completely or as supplemental benefits. Membership plans like Mira are flexible, affordable, and cost transparent. Mira covers preventative, urgent care, lab tests, prescriptions, and gym discounts at thousands of clinics and 1600 labs in 35+ states. Now you can stay healthy without breaking the bank.
There's no doubt that health coverage is essential, but the amount you should spend on it varies. Investing in your health now can keep you healthier, longer and prevent major medical issues down the line.
If you are looking for an affordable alternative to health insurance, a membership with Mira provides you access to basic care at a low cost. For a monthly fee as low as $25 per month, Mira can help you find low-cost lab testing, urgent care visits, and up to 80% off prescription drug prices.
Alexis Bryan MPH, is a recent graduate of Columbia’s Mailman School of Public Health. She is passionate about increasing access to care to improve health outcomes. Outside of work, she loves to travel, read, and pay too much attention to her plants.