Premium (Health insurance premiums)
What Is a Health Insurance Premium?
Health insurance premiums are the amounts paid to an insurance company in exchange for monetary coverage of future medical expenses as stipulated in the insurance policy.
Your premium is usually paid to the health insurance company on a monthly, bimonthly, or weekly schedule for specific coverage. These payments represent a contractual agreement that the insurer will provide for and pay for the stated policy coverage.
How Your Premium is Paid
There are several ways that a health insurance premium is paid:
- If you're employed, your employer may pay all, or some, of the policy payments. Any remaining payment becomes your responsibility.
- If you're self-employed, you pay the entire cost of your premium.
- If you're purchasing your own policy, you are responsible for the payments, minus any subsidy you get from a state or federal health policy.
What Does the Premium Cover?
It can be confusing to understand what is or is not covered when selecting your insurance plan, so be sure to take the time to go over your options.
What Is Covered by Health Insurance Premiums?
Your health insurance policy will clearly outline what medical expenses will be covered by your premiums. The medical expenses typically covered in full, aside from possible copayments, will include annual check ups and preventive care. Health insurance companies do this as a way to invest in your health so they can save on medical procedures down the line.
What Is Not Covered by Health Insurance Premiums?
Your premium will not cover any out-of-pocket expenses which will be clearly outlined in your health insurance policy. Out-of-pocket expenses typically refer to coinsurance, copayments, and deductibles. These costs will be paid out of your pockets to your health provider in conjunction with your premium payments to your health insurance provider.
Are Premiums Tax-Deductible?
Yes, premiums are tax-deductible if you qualify for itemizing your expenses on the IRS tax form 1040A. The amount of deductible premiums is directly related to your AGI, or adjusted gross income, an amount calculated on the first page of the 1040A form. The basic guidelines are:
You can claim payments that you paid with after-tax income. You cannot claim premiums paid by your employer, by a medical subsidy or by you from pre-taxed income.
- If you are younger than 65, you can deduct your medical expenses that exceed 10% of your AGI.
- If you are 65 or older, you can deduct your medical expenses that exceed 7.5% of your AGI.
If you’re curious about what is covered with your premiums, it would be a good idea to talk to a professional. Feel free to give our experienced agents a call at 858-771-4087 or enter you zip code here!