Unraveling the factors that impact health insurance premiums


This guide outlines the factors that impact health insurance premiums and can raise or reduce them.

Health insurance is a crucial component of financial security and access to quality medical healthcare. It protects you from unexpected medical costs that could otherwise prove financially devastating.

However, health insurance can get expensive, especially when paying the premiums out-of-pocket. That’s why it’s critical to understand the factors that influence your health insurance premium—the amount you pay for coverage.

Numerous elements affect health insurance premiums when you’re comparing plans and pricing options. Factors like age, health status, lifestyle habits, types of coverage, geographic location, income level, family size, deductibles, co-payments, and the insurance company itself play vital roles in premium determination.

By learning how these factors impact costs, you can find the most suitable coverage while managing expenses. Let’s explore the key factors that impact your health insurance premium.

Factors that impact health insurance premiums

Below are the integral factors that influence medical insurance costs:


Age is a significant factor that influences health insurance premiums. Usually, younger individuals tend to have lower premiums compared to older individuals.

For instance, a healthy 25-year-old may pay $250 monthly, while a 60-year-old may pay $700 for similar coverage. This is because younger policyholders are statistically less likely to require extensive medical care and are considered lower-risk policyholders.

Insurers levy higher premiums on older policyholders owing to the greater healthcare usage and costs that come with age. Higher elderly premiums balance out their likelihood of requiring more medical care during policy periods. However, while premiums rise with age, other expenses like deductibles often remain equal across age groups on the same plans.

Health status

Your current health and medical past prominently sway the expense of health insurance premiums. When applying, you must disclose pre-existing conditions, chronic ailments, disabilities and other factors insurers will utilise to evaluate overall risk.

Those with complex pre-existing diseases or extensive health histories frequently encounter exceptionally high premiums resulting from the greater odds they’ll incur elevated medical bills. However, many jurisdictions have regulations deter insurers from wholly refusing applicants based on health histories. Instead, insurers recover costs through higher premiums.

Lifestyle factors

Certain lifestyle factors like smoking or adventure sports may heighten health insurance premiums. For example, insurers often charge smokers around 50% extra owing to the numerous health complications triggered by tobacco, like cancer, cardiac disease and lung disorders.

Similarly, those actively rock climbing or scuba diving may encounter premium surges due to the higher injury risks. Obesity can also influence premiums, with overweight individuals facing more obesity-related diseases. Discussing lifestyle choices with agents assists in determining associated expenses.

Coverage type

The type of health insurance coverage you choose can significantly affect your premium. Generally, plans with broader networks and more comprehensive coverage tend to have higher premiums.

Coverages differ in provider networks, flexibility in picking doctors/hospitals, pharmaceutical benefits, deductibles, co-pays, co-insurance and out-of-pocket maximums.

Generally, plans guaranteeing extensive coverage with more flexibility and lower cost-sharing levy the highest premiums. Comparing premiums across plan categories assists in choosing cost-efficient options suiting medical requirements.

For instance:

  • Mediclaims have lower premiums but constrain you to tight networks and capped claim amounts.
  • Critical illness plans offer enhanced protections for specific illnesses but at higher premiums.
  • Top-up covers supplement base policy amounts when exhausted, for additional premium fees.

Plan level and benefits

The level of coverage and benefits can impact your health insurance premiums within a specific type of health insurance plan. Insurance plans are often classified into tiers, with each tier offering different levels of coverage and cost-sharing. Plans with higher coverage levels and lower out-of-pocket costs generally have higher premiums.

Geographic location

Where you reside notably influences premium rates. Premiums diverge heavily between different states, cities and even codes owing to massive differences in local medical costs, regional disease patterns, health infrastructure availability and competition between providers.

Areas with superior health systems and higher treatment expenses typically have pricier premiums. For example, average premiums in metros would exceed those in smaller towns or rural locales. Always contrast location-specific premiums when evaluating policies.

Family size

The family members needing coverage alter options and health insurance premiums. Premiums rise for each dependent supplemented to policies owing to cumulatively higher risk potential. However, family plans frequently have deductibles applying “per person” instead of together.

For instance, instead of a family deductible, the policy may include a deductible per person. Thereby, covering dependents inflates premiums but lowers “per head” out-of-pocket costs after meeting much lower individual deductibles.

Deductibles and co-payments

The deductible and co-payment amounts you choose for your health insurance plan can influence your health insurance premiums. Opting for higher deductibles and co-payments typically leads to lower premiums, as you are taking on more of the financial responsibility for medical expenses.

The co-payment ratios you select while buying plans also sway premium pricing. Co-payments indicate the percentage share (10-30%) of admissible claims you directly pay during hospitalisation.

Insurers levy lower premiums for policies having higher co-payment ratios since the policyholder shares more financial liability. However, this simultaneously increases your out-of-pocket costs during claims.

Strategies to reduce health insurance premiums

While many determinants of premiums stay externally controlled, certain tactics may decrease expensive premiums if paying out-of-pocket:

  • Rigorously Contrast Plan Options: Thoroughly compare covers across types suiting projected medical needs. Assess usage, network adequacy, and preferred hospitals/doctors before finalising appropriate policies optimising premiums and out-of-pocket expenses.
  • Claim Tax Benefits: Claim eligible tax deductions against premiums paid to lower effective outlays. Section 80D permits tax exemptions for self, family and parents.
  • Choose Optimal Sum Insured: Pick the sum insured correctly by anticipating medical requirements. Lower sums undermine adequate protections, while excessive amounts lead to unviable premiums.
  • Select Higher Co-Payments: Voluntarily opting for higher co-payment ratios while buying plans significantly reduces premium outlays by pre-agreeing to share larger claim cost portions.
  • Prefer Online Policies: Online health plans skip agent commissions, allowing reduced premiums. Even offline covers can get discounted premiums by opting for zero-commission payouts.
  • Re-Evaluate During Renewals: Actively re-examine plans, networks, exclusions, etc., during annual renewals to switch policies or re-negotiate premiums aligning with evolving needs.


Understanding the factors that influence health insurance premiums is important for making the right decisions and effectively managing your healthcare costs. You can find a plan that balances your healthcare needs with your budget, ensuring you have the coverage you need at a reasonable cost

By carefully evaluating these factors and comparing insurance options. It’s essential to review your health insurance coverage regularly to ensure it aligns with your evolving healthcare needs and financial circumstances.

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