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Insurance

Premium

2 min read

Definition

The amount paid periodically (usually monthly) for health insurance coverage. Employers typically pay a portion and employees pay the remainder through payroll deduction.

In This Article

What Is Premium

A premium is the monthly amount you pay for health insurance coverage. For government assistance programs, this works differently than employer-sponsored insurance. If you qualify for Medicaid or Medicare, you typically pay little to nothing in premiums. Some states charge nominal premiums for certain Medicaid categories, ranging from $5 to $50 per month depending on income and family size.

Premiums in Government Programs

  • Medicaid: Most states do not charge premiums for Medicaid beneficiaries. A few states like Indiana and Iowa impose premiums for adults above 138% of the federal poverty level, but these are capped at 5% of household income and waived if you fall below income thresholds.
  • Medicare: Part B and Part D require monthly premiums. In 2024, Part B premiums start at $174.70 per month for most people, though higher-income beneficiaries pay more. Part D prescription drug coverage premiums vary by plan, averaging $35 to $50 monthly.
  • SNAP, TANF, and WIC: These programs do not involve premiums. You pay nothing to participate if you meet eligibility requirements based on income and household size.
  • Marketplace plans: If you earn between 100% and 400% of the federal poverty level, you may qualify for premium subsidies through the ACA, reducing your out-of-pocket costs significantly.

How Premiums Affect Your Eligibility

Premium costs do not directly disqualify you from government benefits. However, your income, including money received to pay premiums, is counted when determining eligibility for SNAP, Medicaid, TANF, and WIC. For example, if your state imposes Medicaid premiums and you cannot afford them, you may be disenrolled temporarily. Most state Medicaid programs allow reinstatement without a waiting period once you can pay.

If you receive subsidized health coverage through the ACA marketplace, premium tax credits reduce what you owe monthly. These credits are based on your projected annual income. If your actual income changes, report it within 30 days to adjust your credits and avoid repaying overpayments at tax time.

Common Questions

  • If I can't afford my Medicaid premium, what happens? Contact your state Medicaid agency immediately. Most states offer payment plans or will reinstate coverage if you fall behind. No state terminates Medicaid solely for unpaid premiums without first notifying you.
  • Do I pay premiums for SNAP or TANF? No. SNAP (food assistance) and TANF (cash assistance) have no premiums. You qualify based on income and household size alone.
  • How do Medicare premiums differ from Medicaid? Medicare is federal insurance for people 65 and older or with certain disabilities. It always involves premiums for Part B and Part D. Medicaid is state-federal insurance for low-income individuals, and most states charge zero or nominal premiums.

Understanding premiums works best alongside these cost-sharing terms:

  • Deductible - the amount you pay out of pocket before insurance coverage begins
  • Copay - the fixed amount you pay per doctor visit or prescription
  • Coinsurance - your percentage of the cost after the deductible is met

Disclaimer: BenefitStack provides benefits navigation information, not financial or legal advice.

Related Terms

Insurance

Deductible

The amount an insured person must pay out of pocket for covered services before the insurance plan begins to pay.

Insurance

Copay

A fixed dollar amount the insured pays at the time of receiving a medical service, such as $25 for a doctor visit or $10 for a prescription.

Insurance

Coinsurance

The percentage of covered medical costs the insured pays after meeting the deductible. For example, with 20% coinsurance, the plan pays 80% and the member pays 20%.

Insurance

HMO

Health maintenance organization. A type of health plan that requires members to use a network of providers and get referrals from a primary care physician for specialist visits.

Insurance

PPO

Preferred provider organization. A type of health plan that offers a network of providers at lower cost but allows out-of-network visits at higher cost without referrals.

Insurance

EPO

Exclusive provider organization. A type of health plan that covers only in-network providers except in emergencies, but does not require referrals.

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