Introduction:
Health insurance is something most people take for granted. You don't think about health insurance until you need it or want to make better use of your premium. Well, I'm here to show you just how important this short article can be. Health insurance plans are important for everyone during their lifetime, but not everyone knows what percentage of their income should go to health insurance.
A few years ago, I heard about a study that asked people how much of their monthly income should be spent on health insurance. The results showed a range from $1 to $6; the median was around $3.If you really want to know how much is enough — or how much you can afford — then it's important to know how much health insurance should be split between you and your spouse. Even though it's a personal choice that ultimately comes down to your household and individual circumstances.
Determine The Number of Paychecks
Once you have determined your monthly income, add up the total number of paychecks per month. Divide this number by 12 to get the number of paychecks per year. The answer depends on how many paychecks per month you have, but it's usually between 10% and 20%.
The number of paychecks to go toward health insurance depends on your situation. If you have a high-deductible health plan, the amount you'll spend on health insurance is often less than the amount of money you pay out of pocket each month.
If you're self-employed, however, it's important to know how much time you have between jobs and when you can expect to be able to afford coverage through an employer plan or public exchange. The first step to determining how much you should be paying for health insurance is to determine the number of paychecks in a year.
This number will vary depending on your job and your income. If you have more than one job, then it's important to consider the total amount of money coming in each month. The most common way to calculate this is by dividing your annual income by 12 (the number of months).
Once you have determined how much money comes in each month, then it's time to look at how much medical expenses are likely to cost.
The average American spends $4,000 per year on healthcare costs -- which includes both premiums and out-of-pocket expenses for doctors' visits and prescription drugs. So if you're making $40,000 per year, then your monthly premium should be around $1,600 per month.
The percentage of your income that should go to health insurance depends on the number of paychecks you receive.
If you have only one paycheck per month, then it's easy to calculate how much money you need to set aside for health insurance. Just multiply your monthly salary by 12 and divide that number by 12. The answer is what percentage of your total household income should go to health insurance.
For example: If I make $10,000 per year, then I need $1,200 in savings just for health insurance. This means that if I had two paychecks at once (one every two weeks), I would have enough for my healthcare plan.
But what if my husband makes more than me and earns more than $10,000? In this case, we could use his entire income as our base amount instead of just half of it (as long as he doesn't earn more than $20,000). In this case, we would need $2,000 in savings just for healthcare coverage!
Gross Monthly Income
The amount of money that your family should spend on health insurance depends on your gross monthly income, which is the total amount of money you earn each month before taxes. If you make $2,000 per month and have no other debt or expenses, then this is what we recommend:
If your family earns $2,000 per month and has no other debts or expenses, we recommend putting about 10% of your income toward health insurance. This will allow you to pay for a high-deductible plan with a typical premium of $1,000 per month (or less).
If your family earns $2,000 per month and has one other debt (such as a mortgage) or two other expenses (such as rent), we recommend putting 20% toward health insurance. This will allow you to pay for a high-deductible plan with a typical premium of $1,000 per month (or less).
The amount of money you need to pay for health insurance depends on your annual income.
If your gross monthly income is less than 400 percent of the federal poverty level (FPL), you can get federal subsidies to help pay for health coverage through the Health Insurance Marketplace.
The FPL is $12,000 for an individual and $24,000 for a family of four. If your family has less than those amounts, it's considered low-income and eligible for Medicaid or CHIP in most states.
If your gross monthly income is more than 400 percent of the FPL but less than 500 percent of the FPL, it's considered near-poor and eligible for premium tax credits through the Health Insurance Marketplace.
These credits are based on age as well as income level -- so younger people will get more credit than older ones who have higher incomes -- but they're still capped at 138 percent of the poverty level regardless of age or family size (see chart below).
Determine Health Insurance Savings
Rate
The health insurance savings rate is the amount of money you will save by not having to pay for health insurance. This is different from the cost of health insurance, which is the amount you pay each month for coverage.
The health insurance savings rate can vary based on your age and health status, but it's generally about 10 percent of your monthly income. If you have good health, this may be enough to cover all of your medical expenses without having to pay anything else out-of-pocket. If not, there are ways to reduce costs even further.
The health insurance savings rate is the percentage of a person's total income that they can save by purchasing health insurance.
Health insurance savings rates vary by state, but they are generally higher in states with high-deductible health plans (HDHP). In these states, consumers pay more out-of-pocket for medical expenses than they would if they were covered under an HSA or other high-deductible plan.
The health savings account (HSA) is a type of tax-advantaged savings account that allows individuals to contribute money to their accounts.
Those contributions can be used for any purpose -- including paying for medical expenses not covered by traditional Medicare or Medicaid -- with no restrictions on how much can be contributed each year or how much can be withdrawn from the account each year.
Determine Health Insurance Savings Rate
Health insurance savings are a measure of how much your health insurance costs you for the year. The higher the savings rate, the better.
The average U.S. household pays around $5,000 in annual premiums for health insurance, according to the Kaiser Family Foundation (KFF). The KFF also reported that about half of Americans don't have any kind of health coverage at all.
If you're one of these people, it's likely that you'll be spending more than $5,000 on your own healthcare expenses each year -- and that's not even counting the cost of prescription drugs or procedures like doctor's visits and hospitalizations that aren't covered by your employer or government programs like Medicare.
Think about savings and credit.
If you're not insured, you may think that health insurance is expensive. But it's not as bad as it seems. The average American spends $5,000 on health care every year. For many people, this is the largest expense in their budget -- more than rent or food. If you don't have insurance, your expenses are going up by thousands of dollars every year.
But there's an easy way to cut back: Think about savings and credit. If you're spending more than 10% of your income on health care, consider cutting back elsewhere until you can afford coverage. You'll still be able to pay for basic needs like housing, transportation, and food -- but now you'll have extra money left over each month for other expenses like entertainment and travel.
Health insurance is one of the biggest expenses that many people face. It's important to think about how much of your budget should go toward health care, and how much should go toward other expenses.
Health insurance is not just for emergencies and hospital
stays; it helps pay for routine doctor visits and prescription medications. The
amount you spend on health insurance depends on your monthly income and family
size. You should pay for health
insurance that covers your entire family.
The more people you
cover, the less you pay per person.
If you have a family of
four, for example, you should be paying about $8,000 per year for health
coverage. If you only have one child, it would cost only $4,000 per year to
cover them with a high-deductible plan (like the ones offered by many
employers).
However, if you have
two children and want to save money on premiums and deductibles by getting them
covered on their own plans through a marketplace or state exchange, then it may
be better to go with a lower deductible plan instead of going all out with a
more expensive policy that covers everyone.
How much is enough?
The amount you should spend on health insurance depends on your income and family size.
The Affordable Care Act (ACA) requires everyone to have some form of health insurance or pay a penalty. If you're not covered by an employer or government program, you can shop for individual coverage on the open marketplaces or through state exchanges.
Once you find a plan that fits your needs, consider how much you're willing to spend on healthcare every month -- and whether that's enough to cover all of your medical expenses. For example, if you're self-employed and don't have access to employer-sponsored coverage, then it's up to you to decide whether paying for private health insurance makes sense for your family.
Here are some guidelines for determining how much is enough:
The amount of health insurance you need to get depends on your income, family size, and other factors. If your monthly income is less than $30,000, you're eligible for Medicaid or Medicare. For people who make more than that, there are other options:
A Medicare supplement plan can help cover some of the costs of medical services not covered by Medicare Part A (hospitalization) or Part B (prescription drugs).
A high-deductible health plan (HDHP) lets you pay more out-of-pocket before insurance kicks in. The lower your deductible and out-of-pocket expenses are, the better off you'll be financial if something goes wrong with your health care -- but it also means you'll have to pay more in premiums each year because they're set higher than a traditional high-deductible plan.
If you have a low income but want coverage anyway, HealthPocket offers an affordable alternative that provides access to doctors' visits and emergency room visits without having to pay any money upfront (many insurance companies require patients to pay upfront).
Get a quote and buy online today
The best way to determine how much you should spend on your health insurance is to get quotes from multiple insurers. A good place to start is with the Health Insurance Marketplace, where you can compare plans side-by-side and see what's available in your state.
Once you've selected a plan, you can then contact the insurer directly and ask for a quote.
The following chart shows how much people typically spend on health insurance each month:
The answer depends on your health status, family size, and other factors.
If you have a chronic condition such as heart disease or diabetes, you'll need to spend more on health care than someone who is healthy but goes to the doctor regularly for checkups.
If you're young, single, and healthy, you may be able to get by with minimal coverage -- especially if you're willing to pay out of pocket for emergency room visits when necessary. But if your family includes children and/or other dependents who need regular medical care, then it makes sense to buy more comprehensive coverage from day one.
Health insurance can be purchased through an employer or through an individual policy purchased directly from an insurer or broker at any time during employment (or before).
Conclusion:
Besides health insurance, putting away a small emergency fund is important. The general rule is to have 3-6 months' worth of expenses saved in case you get laid off, a medical emergency happens or you otherwise need the money. It doesn't matter if you don't need it – the point is that there's money available to you should rough times come.
Something that we think matters a lot is the cost of insurance. We don't want to encourage people to spend beyond their means, so we have these three levels of health insurance plans with premiums ranging from $30 per month to $125 per month. The best way to approach this is to start with a general estimate of your monthly income.
Then, you can do the math and figure out how much you should be devoted to health care premiums. To get this number, divide your monthly income by twelve (to get to an average per month) and then multiply that figure by 0.35. If that number is greater than the cost of the premium, you're good to go!
0 Comments