Health insurance premium vs health insurance deduction? Consumer Q&A
If you have employer-based health insurance, open enrollment is when you’re asked to make a health insurance selection for the coming year. A lot of companies are having their open enrollment period now, and whatever health plan you choose, that’s the one you’re going to be stuck with for all of 2013.
It’s a big decision, but before you can make a wise choice, you need to know your terms. So here’s an excellent question for you. Last week on Yahoo Answers, someone asked what the difference is between a health insurance premium and a health insurance deduction. Do you know?
Not deductible, mind you, but deduction.
The eHealthInsurance reply was voted Best Answer:
Here’s an example. I’m going to base it on someone with employer-sponsored health insurance, since that helps.
Okay, so Joe works for Company X and they offer health insurance to employees. In order to provide Joe with health insurance, Company X has to pay the health insurance company a premium of, say, $500 per month. That’s the ‘premium’: the total amount paid to the insurance company to keep Joe’s coverage in effect on a month to month basis.
Now, lucky for him, Joe doesn’t have to pay all of that $500. Company X pays most of it, but they do require that he contributes $100 per month toward his premium. $100 is therefore deducted from Joe’s monthly salary for this purpose. That’s the ‘deduction’: the amount taken from Joe’s pay and applied toward his monthly health insurance premium.
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