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It’s open enrollment season, the time each year when millions of American workers and retirees must choose a health plan, whether new or existing.
But picking health insurance can be a dizzying venture. Health plans have many moving parts — which may not come into focus at first glance. And each has financial implications for buyers.
“It is confusing, and people have no idea how much they could potentially have to pay,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners, based in Jacksonville, Florida. She is also a medical doctor.
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Making a mistake can be costly; consumers are generally locked into their health insurance for a year, with limited exception.
Here’s a guide to the major cost components of health insurance and how they may impact your bill.
The premium is the sum you pay an insurer each month to participate in the health plan.
It’s perhaps the most transparent and easy-to-understand cost component of a health plan — the equivalent of a sticker price.
The average premium for an individual is $7,911 a year — or $659 a month — in 2022, according to a report on employer coverage from the Kaiser Family Foundation, a nonprofit. It’s $22,463 a year — $1,872 a month — for family coverage.
However, employers often pay a share of these premiums for their workers, greatly reducing the cost. The average worker pays a total $1,327 per year — or, $111 a month — for individual coverage and $6,106 — $509 a month — for family coverage in 2022, after factoring in employers’ share.
Your monthly payment may be higher or lower depending on the type of plan you choose, the size of your employer, your geography and other factors, according to KFF.
Low premiums don’t necessarily translate to good value. You may be on the hook for a big bill later if you see a doctor or pay for a procedure, depending on the plan.
“When you’re shopping for health insurance, people naturally shop like they do for most products — by the price,” said Karen Pollitz, co-director of KFF’s program on patient and consumer protections.
“If you’re shopping for tennis shoes or rice, you know what you’re …….