Before we go into whether or not you should even purchase health insurance on your own, we want to be sure that you’re aware that health insurance rules saw quite a few changes this year. Here are two big ones that directly affect your choices:
1) The individual mandate penalty was removed.
You will no longer get a tax penalty for not having “minimum essential coverage,” as defined by the Affordable Care Act (ACA). The individual mandate penalty, which currently requires most Americans to carry a minimal level of health coverage or else incur a heavy fine, was removed. The penalty will only stay in effect up until the end of this year and then reduced to $0 in 2019.
The decision to forego health insurance is an individual one, but estimates show that more than 85% of working adults had health insurance this year. Also, remember that federal subsidies are available to help Americans pay for premiums on plans purchased through the ACA’s healthcare exchanges, and plans will negotiate lower healthcare rates for you so that you’re not stuck with exorbitant bills if a health issue arises.
2) Rules for short-term insurance plans and association health plans were loosened this year.
The Trump administration issued regulations this year that expanded the availability of short-term insurance plans and association health plans (AHPs), and consumers should be wary of the president’s claim that they will deliver “tremendous insurance at a very low cost.”
Short-term (“catastrophic”) insurance plans are intended to fill a temporary gap in coverage, not act as major medical major insurance. Short-term plans don’t have the same protections as ACA-compliant plans, which means they often don’t meet the ACA’s definition of “minimum essential coverage,” don’t cover key elements like prescription drugs or maternity care, and generally limit coverage of people with pre-existing conditions.
True, it’s estimated that next year, premiums for short-term policies will be half the average premium for ACA-compliant coverage. But keep in mind that short-term plans are cheaper because they have far fewer benefits.
Now, association health plans—where small businesses band together to either purchase large group insurance or self-insure—are required to follow ACA rules, but these rules are much less restrictive than those for individual health insurance. So, although the Trump administration loosened the rules for who could join AHPs and opened it to those who are self-employed, AHP coverage might not be as thorough as current individual and small-group coverage.
On a broader level, some argue that the expansion of short-term plans and AHPs could disproportionately hurt sicker people financially, too. Healthy people might be more willing to take on risk with these low-cost options compared to sick people. So, as healthier people move away from contributing to the larger insurance market, premiums for people who need ACA-compliant plans will likely rise.
Should I get insurance through my employer or buy it on my own?
If you’re employed and don’t qualified for government programs like Medicare, Medicaid or TRICARE, your options for where to get health insurance will likely be through your employer or through the individual health insurance market.
Through your employer
Employer-sponsored health insurance is a group health policy selected and purchased by an employer and offered to eligible employees and their dependents. On the whole, the percentage of firms offering health benefits has gradually decreased since 2000, but employer-sponsored health insurance can be a great option if it’s available to you. Here are three main advantages of job-based coverage:
- You don’t have to spend time comparing insurance companies and plans since your employer will do all that work for you
- Employers often split the cost of premiums with you
- Your premium payments can be made pre-tax, which will lower your taxable income
Is employer-sponsored health insurance always the best option?
In 2018, employers on average paid 83% of the premium of single (non-family) coverage. However, depending on what your employer is able to offer, purchasing insurance on your own can be cheaper.
How? First, premiums for group plans—like employer-sponsored health plans—are calculated based on the risk of the group. If you work at a high-risk firm, your premiums might be high. Then, there’s the fact that individual health plans on the Health Insurance Marketplace (the “Exchanges”) provide government subsidies to those who are eligible.
Through the individual market
Purchasing a health plan through the individual marketplace could be a good option for you if you’re self-employed, don’t qualify for government insurance programs, or your employer’s health insurance is inadequate or unavailable to you (e.g. you are a temporary worker). Here are some advantages of individual plans:
- You can choose the insurance company and plan that meet your needs
- You can switch jobs without losing coverage, since your plan isn’t tied to your job
- You may be eligible for a subsidy from the federal government to help pay for insurance
All newly sold major medical insurance plans are now required by law to be ACA-compliant. That means that they must cover 10 essential health benefits with no annual or lifetime coverage maximums; be issued regardless of health status, age or income; and spend at least 80% of their premiums on medical expenses.
Individual health plans on the Exchanges
Plans purchased either in the federal marketplace or state-run marketplaces are typically the best option for people who qualify for government subsidies. You can find these plans on the Exchanges at healthcare.gov.
Government subsidies that help individuals pay for premiums are only available for plans purchased through the Exchanges. Even if your current income makes you ineligible for a subsidy now, it might be wise to purchase a plan through the Exchanges anyway because if your income drops, you could start getting a subsidy mid-year.
In addition to being ACA-compliant, health plans on the Exchanges are required to be certified as qualified health plans (QHPs). Each insurance exchange can set up QHP requirements that exceed the basic guidelines of the ACA.
Individual health plans off the Exchanges
Off the Exchanges, you’ll see two kinds of plans for sale:
Plans not regulated by the ACA include short-term insurance, accident supplements, fixed-dollar indemnity plans, dental/vision plans, some limited-benefit policies, critical-illness policies and medical discount plans.
Questions to ask when choosing an individual plan
When buying insurance on your own, you should ask these four questions to make sure a plan is right for you. Together, these will give you an idea of the most important factors that affect your total healthcare spending.
1) What types of plans can I choose from?
ACA-compliant plans usually fall under four metal categories: bronze, silver, gold and platinum. Bronze plans are the most basic and are often what are known as high-deductible health plans (HDHPs). They have the lowest premiums of the four metal levels, but you have to pay more before coverage kicks in. Platinum plans are on the opposite end of the spectrum and cover the largest portion of your healthcare bill.
Two important notes here:
2) Are my drugs covered?
Consumers often shop for plans solely based on the cost of premiums, but if you have expensive healthcare needs, you may come out ahead if you pay more for a plan that covers them. This includes prescription medications.
To make sure you have access to the doctors, services and prescriptions you need, you’ll want to check some of the plan’s fine print:
- The plan’s summary of benefits (what the plan will and won’t pay for)
- The plan’s care type (e.g. HMO, PPO, EMO)
- The plan’s provider network (doctors and hospitals that the plan has contracted with)
- The plan’s drug formulary (list of covered drugs)
Then, estimate your yearly expected out-of-pocket health spending (including the cost of your medications with available discounts like those from GoodRx) and compare that to what you’d have to pay in premiums.
Checking a plan’s formulary is especially important for consumers who have just been prescribed an expensive medication or have chronic conditions that require medications on an ongoing basis. Don’t forget to check generic alternatives for your drug too. Remember: Unless you experience an event that qualifies you for a special enrollment period, you are locked into your plan for the entire year.
3) How much will my drugs cost?
Let’s say you’ve found some plans that cover your prescription medication(s). Now, it’s time to find out the actual cost of the medicine for the dosage you take. Insurance will pay for some of the cost, but the final price of a drug can vary widely between plans depending on how insurers negotiate prices for the drug and how they choose to split the cost with you.
Another tricky thing to keep in mind is that prescription drug coverage can come in two forms:
Looking into plans that come with a health savings account (HSA) attached could be useful in both situations. With HSAs, you can save some tax-free money to cover the cost of your drugs when you’re still stuck contributing to your plan’s deductible.
4) Is my pharmacy in-network?
Different health insurance plans will contract with different pharmacies, and that will affect where you can get your medications. The list of pharmacies within a plan’s network is usually not a deal-breaker for patients, but it could be if you have very few pharmacies in your area or have difficulty getting to them.
If this is a concern for you, call the insurance company or visit their website to find out whether pharmacies in your area are “in-network.” Some insurance plans also contract with pharmacies that deliver prescriptions to patients in the mail.
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