How age impacts your health insurance costs

When you’re sick, injured, or have unexpectedly high medical costs, health insurance is a safety net that keeps you from paying more out-of-pocket than you would without it.

Having a health policy can keep your medical costs more predictable. But to calculate a rough estimate of what you’ll spend on health coverage, you must know what your policy’s monthly premium amount—in addition to its deductible and copayment—will be.

The older you get, the more risk you pose to health insurance companies, so your insurance premiums will likely rise as you get older. But, insurance companies must follow regulations regarding setting premiums based on a person's age.

Below, we’ll go over how exactly age can impact your premiums and what options you have to keep your cost of healthcare as low as possible.

Is your employer offering you a health reimbursement arrangement (HRA)? Learn more about them in our guide

What can insurers use to determine your health insurance premium?

Due to the Affordable Care Act (ACA), the factors health insurers can use to assess plan premiums are limited. If you’re considering enrolling in a health plan for the first time or want to revise your current plan during open enrollment, it helps to know what affects the monthly premium price you’ll end up paying.

The factors insurers can legally use to determine your monthly payments are:

• Age
• Location
• Tobacco use
• Household size (i.e., individual or family enrollment status)
• Level of coverage or type of metal tier plan (i.e., platinum, gold, silver, or bronze plans)

Factors insurers aren’t legally allowed to use to determine your monthly payments are:

• Your current health status or medical history
• Any pre-existing conditions
• Your sex

How age affects your health insurance costs

One of the most significant factors affecting your health insurance rate is your age range. Before the ACA, insurers were free to set their own rules regarding pricing for different age ranges, and it was typical for older enrollees to pay almost five times more than younger enrollees¹.

But now, there’s a limit to how much more insurance companies can charge based on age. The federal government implemented rules to ensure insurance companies couldn’t charge older adults drastically more than younger policyholders, even if they expect these adults to have an increase in insurance use.

The rules state that anyone 64 or older can’t pay more than three times the base rate, which is the premium for a 21-year-old. Rates gradually rise as a policyholder ages, with the most significant increase occurring after age 50.

Individuals under 21 only pay a fraction of the base rate since they tend to be healthy people with fewer risk factors for critical illnesses.

Why do health insurance premiums increase with age?

There are many reasons why health insurers increase your premiums as you age. These include the increased potential for health risks, more frequent medical expenses, and a higher chance of experiencing critical illnesses.

Increased health risks

Your age helps insurance companies estimate how much you’ll use your health plan. As you age, health risks are more likely to increase. This means you’ll have a greater chance of needing hospitalized care for illnesses, injuries, and other medical conditions.

For insurers, this places you at a higher risk for making a claim. To offset potential claims, insurance companies will ask for a higher premium to help pay for the extra medical services you’re more likely to need.

More frequent healthcare expenses

Older individuals generally need more money to cover their medical expenses, such as routine healthcare treatments and surgeries. You may need more coverage to pay for your routine medical costs. This, in turn, directly impacts your average health insurance premium.

Determining your risk factors and estimating health-related expenses as you age becomes more challenging. This is why health insurance companies put the federal age cap in place for older individuals buying a new medical policy at around 65–80 years old.

Critical illnesses and pre-existing conditions

Aging also comes with a higher chance of getting a critical illness. This includes ailments like stroke, cancer, kidney failure, heart attack, cardiovascular issues, and more.

If you want your insurance company to cover you against these conditions, consider adding critical illness coverage to your plan or insure yourself at a higher level. Either way, you’ll likely pay a higher plan premium amount.

Additionally, older individuals are more likely to have pre-existing health conditions, such as diabetes, high blood pressure, or asthma. While insurance companies can’t use a pre-existing medical condition as a reason to charge you more for insurance, the condition might be more severe when you’re older, thus requiring more medical care and prescription drugs.

Are there any state exceptions to the federal age rule?

A few states set their own standards for determining medical insurance rates. Per the federal government rule, insurance companies aren’t allowed to increase the overall premium for older individuals above three times the base rate. But states can narrow the gap even further between the premium costs paid by their youngest residents and those incurred by their oldest residents.

While this makes plan premium prices more equal, it may also mean younger people will pay more than they would in a different state while older people will pay less.

The following states have set their own guidelines regarding age²:

• New York and Vermont: These states don’t allow using age to determine health insurance rates. Therefore, their premiums don’t vary based on age across the board.
• Alabama, Mississippi, and Oregon: The federal rule applies to people 21 and older. But in these states, people under 21 pay a premium at 63.5% of the base rate.
• Massachusetts: This state has its own rating rules for all age groups. For instance, anyone ages 21- 24 pays 118% of the base rate. Anyone 49 and above has a lower age ratio than the federal amount.
• Minnesota: The federal rule applies to people 21 and older. But while national ratios vary for the under-21 age group, Minnesota uses 89% of the base rate for all policyholders under 21.
• Utah: This state follows federal rules for the 64 and older age group. But people ages 27–36 pay almost 140% more than the base rate in Utah.
  • Rates for children under age 14 have an average health insurance cost fixed at 79% of the base rate.
• Washington, D.C.: Rate factors are lower than federal amounts for all age groups. Individuals age 64 and older pay only two times the base rate rather than three times the base amount.

How premium tax credits can offset higher premiums

Now that you know how age affects your health insurance premiums, you may wonder how you can get financial assistance if you have a higher-than-average premium.

If you are covered or plan to be covered by a plan purchased on a public health exchange, like the Health Insurance Marketplace, you may qualify for premium tax credits, or tax subsidies, to help pay for your insurance premiums.

Because individual market premiums are up to three times more costly for older individuals, the premium subsidies may be much larger for these adults to bring the after-subsidy cost down to an affordable price. These subsidies can offset the cost of any metal-level plan, including health insurance plans that are less expensive than the benchmark silver plan.

The American Rescue Plan also included temporary additional premium subsidies for people who buy a policy on the federal marketplace. The Inflation Reduction Act extended these subsidies through 2025.

These extra premium subsidies reduce the percentage of income that individuals have to pay for their health insurance coverage and eliminate the subsidy cliff. A subsidy cliff is when the premium tax credit eligibility ends typically at a household income of 400% of the poverty level.

This especially helps older enrollees as their higher premium costs make the subsidy cliff more significant than it is for younger enrollees.

Age-based health insurance options

If you’re an older individual, you’ve probably had an employer health plan at some point. Employer-provided health insurance is the traditional way of insuring employees. Employers pay a fixed premium to an insurance carrier covering employees’ medical claims.

Group health insurance can help employers retain their best employees and enhance workplace satisfaction and productivity. Our data shows that older employees are likelier to feel their employer values their physical health. This may be because older employees tend to need medical care more frequently.

But employer-provided health insurance can be rigid, expensive, and offer an insufficient level of coverage for every employee’s healthcare needs. Luckily, you have a few other health insurance coverage options if you don’t want or don’t have an employer-sponsored plan.

Medicaid

If you meet income requirements, you may be eligible to enroll in your state’s federally funded Medicaid program. Eligibility for this type of health insurance depends on your income, family size, and whether your state has adopted the expanded form of Medicaid.

In states that have expanded the Medicaid program, the federal government has set the household income limit to 138% of the federal poverty level (FPL)³.

Medicare

If you're 65 and paid into Social Security while working, you’re eligible for Medicare automatically. Medicare is a government health insurance program for people aged 65 and older and those with disabilities or end-stage renal disease (ESRD).

Once you're on Medicare, you can enroll in a Medigap or Medicare Advantage plan to help with costs not fully paid by Medicare. While some Medigap rates are age-based, Medicare Advantage plans don’t count age as a factor.

Suppose you’re still working at 65 and have health insurance coverage under an employer-sponsored group plan at a company with 20 employees or more. In that case, you don’t have to enroll in Medicare immediately.

But you may want to enroll in Medicare Part A anyway—even if you have group health coverage already. It won’t cost you anything, and this way, Medicare can serve as your secondary insurance and pay for anything your employer-sponsored health plan doesn’t cover.

Options for younger individuals

The options you have as a younger individual or student depend mainly on whether your parent’s plan covers you, your income level, or if you’re employed.

If you are under 26 years old, you have three options for getting health insurance if you don’t have a plan through your employer:

• Depending on your income, you may qualify for Medicaid.
• You can stay on your parent's health insurance policy until age 26.
  • New York allows parents to extend health insurance coverage for children up to age 29 under the “Age 29” Dependent Coverage Extension law⁴.
• You can purchase an individual health plan that covers essential health benefits through a public or private exchange.

Conclusion

Your age is the most important factor in determining your health insurance premium. Getting an affordable health insurance plan that meets all your medical needs is possible if you're an older individual concerned about premium costs. Using your age, you can compare your options, explore premium tax credits and other financial help, and pick the right health coverage for you.

Not receiving a necessary medical service can worsen health conditions and delay treatments, leading to poorer outcomes and increased medical expenses. By having health insurance, you can be sure you’ll stay as healthy as possible at any age.

This article was originally published on December 17, 2020. It was last updated on September 5, 2023.

1. https://www.commonwealthfund.org/publications/issue-briefs/2018/apr/how-affordable-care-act-has-affected-health-coverage-young-men#:~:text=Prior%20to%20the%20ACA%2C%20young%20women%20paid%20as%20much%20as%2045%20percent%20more%20for%20health%20insurance%20than%20did%20young%20men.2%20A%2064%2Dyear%2Dold%20would%20pay%20about%204.8%20times%20as%20much%20as%20a%2026%2Dyear%2Dold%20for%20the%20same%20coverage.3
2. https://www.valuepenguin.com/how-age-affects-health-insurance-costs
3. https://www.healthcare.gov/medicaid-chip/medicaid-expansion-and-you/
4. https://www.dfs.ny.gov/consumers/health_insurance/cobra_and_premium_assistance