Health insurance means different things to people across the world – the USA’s system is known for several distinguishing features, including a high relative cost to the individual and a lack of universal coverage.
You may be wondering why the cost of healthcare insurance seems to be rising and how the picture compares to other nations. In a country that spends nearly US$4 trillion on healthcare yet finds coverage varies widely, there’s a lot to weigh up. “How much does health insurance cost?” is one of the most important questions to Americans.
Across the United States, Americans pay wildly different premiums monthly for health insurance. The average annual cost of health insurance in the USA is US$7,739 for an individual and US$22,221 for a family as of 2021, according to the Kaiser Family Foundation – a bill employers typically fund roughly three quarters of.
The cost to each person can vary a lot, however, based on factors such as age, geography, employer size and the type of plan they’re enrolled in. While these premiums are not determined by gender or pre-existing health conditions, thanks to the Affordable Care Act, a number of other factors impact what you pay.
Deductibles, also known as out-of-pocket fees, are a common feature in American health insurance policies, meaning upfront costs are common even for those who are insured. 83% of covered American workers have a general annual deductible that must be met before services are funded by their health plan and the average size of a deductible is US$1,644 for individuals. These fees tend to be higher in smaller firms.
Of course, not all companies offer health benefits to employees – 44% of firms did not offer insurance to staff in 2020.
For those without cover, as well as entrepreneurs and the self-employed, taking out private health insurance is a common route. The average cost of purchasing your own health insurance in this way is US$456 per month for unsubsidised individuals in the USA, according to a 2020 survey by eHealth.
Insurance costs are rising globally.
Find out what’s driving up prices
What influences the cost of health insurance in the USA?
Americans and visitors alike often wonder why health costs are so high in the USA, a nation where per capita health spending is almost twice the average seen in other wealthy countries. The answer to this question is complex.
The American treatment cost gap and health insurance cost
The raw cost of treatment is higher in the USA than in many countries, so this influences the cost of insurance. There are several reasons for this cost gap:
- Pharmaceutical drugs, for instance, cost nearly four times more in the USA than other similar countries
- American doctors and nurses enjoy some of the world’s best pay – the average registered nurse in California earns US$113,240 – so this also drives up cost
- The American system also tends to favour more frequent interventions and complicated procedures, which comes with a price tag
Due to the sizeable treatment cost differences, many international insurers – including William Russell – do not cover treatments that take place on American soil as part of our standard policies.
However, if you’re an American citizen working overseas, then it’s good to know our health insurance comes has the option of short-term cover in the USA.
Administrative factors and health insurance cost
Estimates suggest 15 to 30% of healthcare spending in the USA is for administrative services, such as billing costs – a large part of the difference between healthcare costs in the USA in Canada can be explained by administration spending. These might be higher due to the complex structure of healthcare in the USA, where federal, state and local governments, employers, insurers and citizens all have a share to pay.
Why do US health insurance costs keep going up?
The cost of US health insurance has almost doubled in a decade, as the table shows:
| 2010 | 2015 | 2020 | |
|---|---|---|---|
| Average employer health insurance costs for family coverage (US$) | $9,773 | $12,591 | $15,754 |
| Average employee health insurance costs for worker coverage (US$) | $3,997 | $4,955 | $5,588 |
What’s behind this trend is the subject of debate – some argue government programmes, such as Medicare and Medicaid (both introduced in 1965), have relieved providers of pressure to keep insurance affordable.
However, it’s likely that some factors driving up the cost of healthcare in the USA may be similar to those in other countries, including population ageing and an increase in chronic illness. Check out eight main reasons healthcare costs are rising globally.
At the same time, a shift towards high-deductible health plans (HDHPs) is increasing the out-of-pocket costs for Americans. Under such plans, families can be asked to pay for their first US$14,000 of medical costs, so the impact may be greater even if their insurance package costs the same overall.
As the USA continues to struggle with high health-care spending, it is critical that we make progress on curtailing these cost.
Irene Papanicolas – Visiting Assistant Professor
Department of Health Policy and Management at Harvard Chan School
Five factors that shape health insurance premiums and health insurance cost for Americans
Some Americans may pay significantly more or less for health cover due to factors such as:
- State laws – these can dictate what health insurance must cover and affect competition. For instance, a 2017 Maine law instructs insurers to compensate customers who find a better deal on certain services. On the flipside, some states have certificate-of-need (CON) laws that may decrease competition
- Your employer’s size – larger employers tend to have access to cheaper cover. Those who don’t have access through their employer will often pay more
- Geography – health insurance can be cheaper in cities than in remote locations
- Plan type – preferred provider organizations (PPOs) tend to cost the most, while high-deductible health plans (HDHPs) cost the least
- Personal factors – such as age
What are the best places for American expats to live abroad?
Find out more here
How do US health insurance costs stack up globally?
Voluntary healthcare payments – including for private health insurance – totalled more than US$1,685 per capita in the USA in 2019.
This is lower than the figure in Switzerland, where voluntary payments were worth US$2,745 per capita. Check out how much medical treatment can cost abroad.
However, the USA’s private spending continues to soar far above that in many other nations. American private health spending is five times higher than Canada’s, for instance.
Why is life expectancy in the US lower than in other rich countries?
The graph below shows the relationship between what USA as a country spends on health per person and life expectancy in that country between 1970 and 2015 for a number of rich countries.
The US clearly stands out as the chart shows: Americans spend far more on health than any other country in the world, yet the life expectancy of the American population is shorter than in other rich countries that spend far less.
What are the best places for healthcare globally?
find out the best countries for medical care systems
How much does health insurance cost? Average health insurance costs by US state
Health insurance costs vary a lot between states. According to a 2019 report by the Commonwealth Fund:
- Hawaii has the cheapest individual health insurance contributions of any US state, at US$755 annually.
- Texas, Tennessee, South Carolina and Michigan all see personal health insurance costs close to the US national average – US$1,427.
- Massachusetts was the most expensive state for health insurance. Here, individual contributions stood at US$1,903.
How do health insurance subsidies work in the USA?
A health insurance subsidy provides government assistance to contribute to the cost of cover – in the USA, the Affordable Care Act (Obamacare) provides a sliding scale of support to US citizens and legal residents earning four times the federal poverty level or less.
In 2021, the federal poverty level is US$12,880 for an individual, so individuals earning less than US$51,520 may be entitled to subsidised health insurance.
Applications are made through the government-run health insurance marketplaces in each state. Changes to incomes may affect eligibility, so applicants sometimes need to pay subsidies back if circumstances change.
What is Medicaid?
Established in 1965, Medicaid is a national public health insurance program funded by income tax. If an individual has an income below the Federal Poverty Level or has a particular disability, they will have their medical cover partially (or entirely) paid for by their state government.
This ‘cover’ includes medicines, doctors, hospitalisations, custodial care, and nursing home care. In 2018, over 17% of the US population was covered by Medicaid.
If you think you might meet the Medicaid requirements as an expat, be aware that you typically have to wait around five years after receiving official immigration status before you can access the service.
What is Medicare?
Medicare is for people aged 65 or over, regardless of income. If an individual has paid Medicare taxes on their earnings while working, they automatically qualify for Medicare. For most people, Medicare support provides a huge reduction in insurance premiums, but still requires a small payment each month.
Foreigners and expats cannot access Medicare benefits unless they have worked in the US for at least around 10 years.
What is Obamacare?
Obamacare, officially titled the Affordable Care Act (ACA), was a piece of legislation passed in 2010 to improve American access to healthcare. Obamacare mandated that everyone buy health insurance, or otherwise face a financial penalty. By forcing all Americans to get medical cover – even the young, healthy ones – it significantly lowered the average cost of insurance premiums across the country.
It is estimated that Obamacare put another 24 million Americans on health insurance policies.
Does Affordable Care Act (Obamacare) apply to expats?
Unfortunately, not anymore. Today, the US Government does not require anyone to subscribe to an ACA-compliant health insurance policy. However, a handful of states still impose a penalty on people who do not comply with the ACA. These are:
- California
- Vermont
- Massachusetts
- New Jersey
Other states are also currently processing legislation that will make health insurance compulsory, so before you move to the USA, check your new state’s laws.
Sky-high underinsurance: how many Americans lack sufficient health cover?
In the first half of 2020, 43.4% of US adults aged 19 to 64 were inadequately insured.
In a lifetime, more than US$400,000 will be spent on healthcare for the typical American resident – many still don’t have all the cover they need to finance this.
The USA currently prohibits annual and lifetime cover limits, but someone may still be underinsured if their out-of-pocket costs are unaffordable to them.
American health insurance vs international cover: what’s the cost difference?
International health insurance is a product designed to offer cross-border coverage. Many Americans are surprised by how affordable health coverage can be when they spend time overseas – so how does this product compare to domestic cover?
At William Russell, our most comprehensive international health insurance plans provide standard coverage in every country except the USA. We’ve published a full guide on how we calculate premiums for health insurance. By comparing our typical premiums to U.S. averages, it’s possible to get an idea of the cost difference between health insurance in the USA and other nations.
| Typical US health insurance costs in 2021 (US$) | The average William Russell international health insurance premium in 2021* (US$) | |
|---|---|---|
| Individual cover | $7,739 | $2,700.20 |
| Family cover | $22,221 | $6,672.90 |
*Based on William Russell premiums in Thailand and Vietnam
We have a full guide on how much expat health insurance can cost in different countries, together with a list of most expensive and cheapest countries for health insurance.
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How does health insurance work for US citizens living abroad?
American expats and others living abroad, including students, will often find health insurance works differently for them.
Does my US health insurance cover me abroad?
Most of the time, your domestic health insurance plan doesn’t provide cover abroad, but there are some cases it will – for instance, for emergencies, medical evacuations or during short trips. Contacting your provider is usually the best way to find out. Sometimes, even if your insurer will cover care in such cases, you may need to pay out-of-pocket and apply for reimbursement.
Do US citizens living abroad have to buy health insurance?
Americans who live abroad, or who spend a large proportion of their time overseas, often find they’ll need a separate health insurance policy for this.
One option is to buy local insurance, but this won’t cover you for trips home and you may find there are language barriers if you need to make a claim.
International health insurance is a popular alternative for American expats living overseas. With William Russell, English-speaking customer service representatives handle every stage of your claim from our UK offices, so you’re in safe hands.
Read more about the difference between travel, local and international health insurance with our FAQ guide.
International health insurance for US citizens living abroad – what’s covered?
How much you’ll pay for health insurance isn’t a number you can guess. It’s affected by many factors, few of which you control.
With William Russell, international health insurance can cover US citizens for:
- Doctor visits, consultations, hospital care and mental health treatment in multiple overseas territories (depending on the plan you choose).
- Up to US$100,000 for unexpected elective medical care and US$250,000 in emergency treatment costs during short visits back to US soil, for reassurance when you visit family or head home for the holidays (if you have picked USA-45 add-on).