How insurance companies set health premiums

Five factors can affect a plan’s monthly premium: location, age, tobacco use, plan category, and whether the plan covers dependents.

FYI Your health, medical history, or gender can’t affect your premium.

How premiums are set

Under the health care law, insurance companies can account for only 5 things when setting premiums.

  • Age: Premiums can be up to 3 times higher for older people than for younger ones.

  • Location: Where you live has a big effect on your premiums. Differences in competition, state and local rules, and cost of living account for this.

  • Tobacco use: Insurers can charge tobacco users up to 50% more than those who don’t use tobacco.

  • Individual vs. family enrollment: Insurers can charge more for a plan that also covers a spouse and/or dependents.

  • Plan category: There are five plan categories – Bronze, Silver, Gold, Platinum, and catastrophic. The categories are based on how you and the plan share costs. Bronze plans usually have lower monthly premiums and higher out-of-pocket costs when you get care. Platinum plans usually have the highest premiums and lowest out-of-pocket costs.

States can limit how much these factors affect premiums.

All Marketplace health plans cover the same essential health benefits. Insurance companies may offer more benefits, which could also affect costs.

Factors that can’t affect premiums

Choosing a health plan

Learn more about choosing a Marketplace plan.