What Is a Premium?
The amount paid to maintain health coverage.
The premium is often the first number people notice. This module explains what a premium is, what it does and does not cover, and why it is only one part of the picture.
What is a premium?
A premium is the amount paid to maintain health coverage. It is often paid monthly. Depending on the type of coverage, a premium may be paid by you, by an employer, or shared between you and an employer.
What paying a premium does not mean
Paying a premium keeps your coverage active. It does not mean that all medical costs are already paid. When you use care, you may still have deductibles, copays, or coinsurance, depending on the plan.
Lower premium, lower total cost?
Not necessarily. A plan with a lower premium may have a higher deductible or higher cost-sharing. A plan with a higher premium may have lower cost-sharing. The total you might spend in a year depends on both the premium and how much care you use.
Why on-time payments matter
If premiums are not paid, coverage may end. Rules about grace periods and payment timing vary by type of coverage and plan. Check your plan or coverage documents for the specific rules that apply to you.
Real-Life Example: Anna’s Premium (fictional example)
Anna has health coverage with a monthly premium of $400.
She pays $400 each month to maintain her coverage, whether she uses health care that month or not.
Over 12 months, her premiums total $4,800.
If Anna receives medical care during the year, she may also have other costs under her plan. Her premium does not mean that all medical care is already paid for.
What this shows: A premium is the regular amount paid to maintain health coverage. It is only one part of the total cost of having and using health coverage.
Key takeaways
- A premium is the amount paid to maintain health coverage.
- Paying a premium does not mean all medical costs are already paid.
- The lowest premium does not necessarily mean the lowest total costs.
- Premium payment rules vary; check your coverage documents.
Educational information only. Examples are fictional and do not describe any real insurer or plan. Health-plan terms and requirements vary — always verify information using your official plan documents. Read the disclaimer.