Why Do Health Insurance Premiums Vary So Much?

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People shopping for health insurance to comply with the Affordable Care Act may be surprised to discover that the cost of plans can vary significantly – even with their own state.

Most Americans are now required to carry health insurance to avoid paying a tax penalty.

Here’s a look at some of the factors that go into determining premium prices.


Older folks can be charged up to three times more for premiums than younger people, who are generally viewed as being healthier and less likely to need ongoing medical care.

Geographic location

Premium prices vary from state to state and even within counties in the same state. In some cases, the lack of competition among insurance companies can drive up prices. State regulations and the cost of living in different areas of the country also come into play.

Tobacco use

Although insurers can’t charge you more for having a pre-existing medical condition, they can charge tobacco users up to 50% more than nonsmokers for the same policy. Studies show smoking leads to increased health-care costs.

Type of plan

The type of plan you choose impacts costs. Plans sold in the federal (HealthCare.gov) and state Marketplaces are divided into five categories – platinum, gold, silver, bronze and catastrophic. Bronze plans have lower premiums, but fewer benefits and higher out-of-pocket expenses. Platinum plans come with higher premiums, but more robust benefits and lower out-of-pocket costs. For instance, if you use health care for a chronic condition, you might consider a more precious metal plan with lower out-of-pocket costs.  All plans under the Affordable Care Act must meet the minimum essential requirements.

Individual vs. family enrollment: Insurers can charge more for family coverage than an individual plan.

Compare plans carefully to find the value and price that suits you best.

Like all tax laws, TurboTax has you covered. If you have more questions about the Affordable Care Act and how it impacts you, you can get your questions answered at TurboTax Health.

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