If you have health insurance, you probably pay a monthly premium. Your premium might be deducted from your paycheck. You may pay it online, or write a check to cover it.

Even though you know your payments go toward your health insurance, you might not know exactly how it’s used. In simple terms, your money helps cover the cost of your health care.

Where does my monthly payment go?

A major part of your premium is used to help cover hospital visits, doctor’s visits, prescription drugs, medical tests, physical therapy, dental care, wellness programs, gym discounts and other expenses that help keep you healthy. Even if you never use any medical or health services, your premium payments still go to a pool of money used to pay the medical bills for all health plan members.

What do doctors get from my monthly payments?

Along with hospital costs, your monthly premium helps cover the cost of running doctors’ offices and clinics. Staff, rent, medical equipment, electricity and air conditioning are just some of the expenses your money goes toward. A part even helps pay for malpractice insurance.

What do hospitals get from my monthly payments?

Money from your premium helps pay for the cost of running the hospital. For example, it pays for nurses and other health care professionals. It also covers maintenance of medical equipment, information technology and financial management. Any profit is used to build new hospitals and testing facilities, create care programs and buy new equipment for testing, treating and diagnosing patients.

Despite efforts to help every American get health care coverage, it’s a slow-going process. Still, hospitals provide care to people in serious need with or without insurance. For those who are not insured, health care bills are often paid out of pocket over long periods of time. This can be costly for the patient — and a loss of income for the hospital. To help cover this loss, hospitals use some money from premium payments to treat uninsured patients.

What do drug companies get from my monthly payment?

Drug companies invest a lot of money in the research and development of new drugs. Once a drug is approved, it has to be produced and shipped to drug stores. It has to be marketed to medical professionals so they know it’s ready for patient use. Drug companies use the money they get from insurers to help pay for these efforts.

In return, health insurance companies work closely with drug companies to secure lower drug prices for their members. Even though a large part of your monthly premiums goes toward drug coverage, the costs are still much lower with insurance than if you paid out of pocket.

If you have any questions about your health insurance, coverage or payments, please leave us a note in the comments.

Want to know more? Read "What Happens to the Rest of My Monthly Payment?"

Originally published 7/5/2016; Revised 2022, 2024