Health insurance isn’t cheap, but going without it can be financially devastating. Here are some low-cost options.
Whether you’re self-employed, unemployed, or covered under an employer’s health-care plan, finding affordable health insurance can be a frustrating, time-consuming process. Throw in controversy around the Affordable Care Act (ACA), and finding accurate, reliable information can be a nightmare. Sure, cheap health insurance exists, but qualifying can be tricky, and you’ll want to be sure the coverage isn’t too skimpy to cover your needs.
In this article, I cover the true costs of going uninsured, what health-care reform means for you, and general tips that will help you get the best deal on health coverage. I also detail case studies on how two fictional shoppers found cheap health insurance.
No matter what your health insurance needs are, it pays to shop around. Now is the time to do it: Open enrollment to get coverage in 2016 lasts until Jan. 31, 2016. After that date, your options will be very limited until 2017. You can get started by using our online search tool that will help you find and compare health care plans in your area.
The Cost of Going Uninsured
Health insurance can be expensive, but before you decide to go without, take a careful look at the risks. For instance, according to WebMD, there’s a 1 in 5 chance you will land in the ER at some point between the ages of 25 and 44, a trip that could cost you as much as $1,450 a pop. If you need surgery on a broken arm, you could be on the hook for more than $16,000 if you’re without insurance. In fact, 1 in 4 uninsured people will lose all their savings to medical bills, which remain the leading cause of bankruptcy in the U.S.
If that’s not scary enough, remember that under the Affordable Care Act (ACA), you now must pay a penalty tax for going without health coverage unless you meet certain exemption criteria, including financial hardship.
In 2016, you’ll be assessed a penalty of 2.5% of your household income or $695 per person — whichever is higher. That’s a big increase from the 2015 penalty, which was 2% of your household income or $325 per person. The flat fee will continue to be adjusted for inflation every year.
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Six Strategies for Finding Cheap Health Insurance
It’s illegal for different vendors to charge different prices for the same health plans, so finding affordable health insurance is more about making sure you’ve evaluated all your options from the widest possible range of providers. It also means you should have a good idea of what your needs are before you shop.
Remember, the cheapest plans usually offer the least coverage, and only you can decide whether saving a few dollars is worth that particular pitfall.
1. Shop around
While convenient, the state exchanges set up through the ACA aren’t your only avenues for finding cheap health insurance. You have several other options, and you have nothing to lose (except money) by checking out one or all of them.
Buy Direct Through Insurance Companies
Insurers may have a greater range of policies available on their websites than they do on the state exchanges. Most will let you directly compare plan details, see more detailed information, and apply online. Of course, you won’t be able to see options from other providers, so this might not be your best bet for saving money unless you know which company you want to do business with.
Buy Through an Agent
An insurance agent can be a good option if you’re overwhelmed by your choices and feel you need expert help to make the right health insurance decision.
There are two main types of insurance agents: “Captive” agents offer products through only one company, while independent agents (also called brokers) can help you choose a plan from one of several insurers.
If savings is your bottom line, it probably makes more sense to work with an independent agent who will be able to find and compare more options. But if you’re set on working with a certain company, a captive agent may better know their products.
Buy Through an Online Insurance Finder
Online insurance finders like eHealthInsurance are kind of like independent agents, minus the personal touch. After you answer a few questions, they’ll offer plans from several companies that may include options not shown via your state marketplace.
Convenience is your major advantage with online services, as they’ll save you the time and effort that’s involved in meeting with an agent. Just be sure to read the fine print and know exactly what you’re signing up for before you choose a plan.
2. Know Whether You Qualify for Special Programs
Medicare, Medicaid, and CHIP (the Children’s Health Insurance Program) provide low-cost, federally subsidized health care for those who qualify.
Medicare, the most well-known of the bunch, is specifically for those over age 65, while Medicaid is meant for those with very low incomes. CHIP is meant for children (and, in some cases, their families) who don’t qualify for Medicaid but can’t afford to buy insurance otherwise.
The easiest way to determine eligibility is by applying for health plans through your state health insurance exchange. If you’re eligible, you can enroll in Medicaid and CHIP at any time of the year.
3. Make Sure COBRA Is Worth It
The Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, lets you stay on your employer’s insurance plan for up to 18 months when you would otherwise lose coverage, typically because you were laid off. But it’s also a very costly way to stay insured.
One study found that individual mid-level coverage on a dozen state marketplaces costs an average of $336 a month. Ouch, right? Well, compare that to the average monthly cost of individual coverage with COBRA: $490.
Of course, COBRA can still be advantageous if you need to maintain access to providers who may not be available under other plans, or if you know you have a big medical expense coming up and have already met your deductible for the year. Be sure to weigh these factors when you’re comparing costs.
4. Hit Up Your Parents
If you’re under 26, the ACA allows you to stay on your parents’ health insurance plan. Even if you pay your parents the difference between keeping you on their plan and dropping you, this may well be your cheapest option.
You can take advantage of this option even if you’re married or otherwise financially independent of your parents. Just be sure that your parents’ insurer offers in-network care providers where you live; out-of-network costs can add up quickly and cancel out your savings.
5. Consider High-Deductible or ‘Catastrophic’ Plans
If you don’t anticipate using your health plan much, high-deductible plans with lower monthly premiums might be the way to go.
Under the ACA, you’re eligible for catastrophic plans with low premiums if you’re under 30, or over 30 and qualify for a hardship exemption. (Hardship exemptions include more dire financial circumstances including homelessness, recent eviction, and bankruptcy — see a full list on healthcare.gov.
A catastrophic plan entitles you to three primary care doctor’s visits per year, prescription coverage, and other essential benefits. However, you’ll pay out of pocket for any medical care outside those parameters until you reach a pricey deductible — $6,850 in 2016. Insurers also have a range of high-deductible plans available directly through their websites.
While you’ll pay low premiums with a catastrophic or high-deductible plan, experts say only those who are young and in excellent health should consider them. And make sure you have a way to meet the high deductible if you need to — otherwise, your cheap plan can become very costly if you need care that isn’t covered.
If you’re shopping through your state marketplace, know that catastrophic plans aren’t eligible for subsidies that apply to other marketplace plans. If you’re eligible for subsidies, the savings can make up most of the cost difference between catastrophic plans and high-deductible bronze plans, sometimes making bronze the way to go because of better coverage.
One more tip: Consider opening a health savings account (HSA) if you go with a high-deductible plan. You can sock away money in an HSA completely tax-free to help you pay for health care. Individuals can contribute up to $3,350 in 2016 as long as they are enrolled in a health care plan with a deductible of at least $1,300.
If you don’t use the funds by the end of the year, don’t worry — they can roll over to the next year. Some financial advisors even recommend using HSAs as a supplementary, tax-advantaged retirement account.
6. Be Wary of Short-Term Plans
Short-term or temporary health insurance plans are likely your cheapest option of all. How cheap? I found short-term plans for myself on eHealthInsurance for as little as $53 per month. These plans are also your only option if you’re shopping for health coverage outside of open enrollment and don’t have a qualifying event that makes you eligible for special enrollment.
But before you jump at a short-term plan to save some cash, beware of the pitfalls that come with these bare-bones policies. First, the protections afforded by the ACA don’t apply here. That means if you have pre-existing conditions, short-term plan providers might not cover you, and if you become seriously ill, you might not be able to renew your plan. And because short-term plans don’t qualify as adequate coverage under the ACA, you will still be hit with the same tax penalties that people without any sort of health coverage must pay.
Second, know just how skimpy the coverage is under short-term plans. Unlike ACA-approved catastrophic plans, preventative care including immunizations and physicals probably won’t be covered. The plans also come with a lifetime cap on care, unlike regular health insurance, so you could run out of coverage in the event of very serious injury or illness.
They also aren’t HSA-eligible, and if you do end up needing significant coverage, you could still be out a large chunk of change thanks to a high deductible — the average annual deductible in 2014 was $3,589 for plans sold by eHealthInsurance.
Bottom line: There are lots of limitations to short-term plans. Although they may be your cheapest option, experts warn against using them except as a last resort in between jobs. Otherwise, a low-cost catastrophic or bronze plan will offer better coverage.
Is the Affordable Care Act an Affordable Health Insurance Option?
Whatever your stance on health care reform, there’s no denying that the ACA has given the uninsured a new option. The ACA, the legislation behind the new health insurance exchanges, aims to make affordable health insurance available to everyone regardless of pre-existing conditions that traditionally make plans too expensive (or keep them out of reach entirely). It also prohibits insurers from dropping you because you get sick, and puts an end to lifetime and yearly plan limits for essential care.
Some states run their own health insurance exchanges, others use the federal exchange, and some have a hybrid. You can find your state’s exchange here.
If you’re considering getting coverage under the ACA, act fast: You must enroll by Dec. 15 if you want to get covered starting Jan. 1, 2016, and Jan. 31, 2016 is the last day to enroll for 2016 coverage. If you miss that deadline, you won’t be able to enroll for the rest of the year unless you meet special criteria — such as having a baby, getting married, or losing other qualifying health insurance.
Understand that just because the ACA aims to make health insurance more affordable, it does not mean that your individual cost will actually be lower. Some people have seen big increases in their health insurance premiums through the new exchanges, so you should also look at your private insurance options to cover all your bases.
What Kinds of Health Insurance Plans Are Available Through the ACA Marketplace?
Plans are categorized in four tiers: bronze, silver, gold, and platinum. They cover about 60%, 70%, 80%, and 90% of your health-care costs, with higher premiums attached to the greater percentages.
Catastrophic plans that cover less than 60% of costs have the cheapest premiums of all, but they are available only if you’re under 30 years old or can qualify for a hardship exemption that waives the fee for going uninsured.
Is Coverage Cheaper Through the Marketplace?
There is no guarantee that you will find cheaper health care plans through the ACA marketplace than other places you can shop, such as directly through insurers’ websites.
In general, you’re more likely to find low-cost medical insurance through the marketplace if you’ve been a high-risk customer to insurers in the past — that is, one who is older or has known health problems. You may also find more affordable health insurance through the marketplace if your income makes you eligible for subsidies that can help keep your costs down.
On the flip side, you may be unimpressed with your marketplace options if you’re younger, in good health, or ineligible for subsidies. To see whether you’re eligible for health care subsidies, check here. To give you a quick example, a family of four in Ohio would qualify for some savings with an income below $97,000; an individual who makes under $47,080 would also be eligible.
Geography will play one of the most important roles in determining coverage available through your state marketplace. For me, a 34-year-old female nonsmoker in Knoxville, Tenn., there are 61 plans available through three providers and 21 with premiums under $300 a month.
If I moved to Columbus, Ohio, there would be 75 plans available, and I’d have eight providers and a greater range of plan types to choose from. But if I lived in rural Buchanan County, Va., an area with limited health-care access, I could choose from just 22 plans. Only two providers are represented, and most of the plans are through relatively restrictive HMOs (health maintenance organizations).
Finding Affordable Health Insurance: Two Case Studies
Case Study #1: Joe, 40
Let’s help Joe, a 40-year-old male in Bethesda, Md., find health insurance. Joe, a nonsmoker with no children, has decided to leave his job in sales to pursue his passion for photography. Of course, working for himself means he’ll need to find cheap health insurance while he gets his business off the ground.
Joe checks his state health exchange first. He learns that his $60,000 annual income means he’s ineligible for subsidies. There are 46 plans to choose from, five of which have a premium under $200 a month. His cheapest option is a bronze plan through CareFirst BlueChoice with a monthly premium of $166.
The annual out-of-pocket maximum is $6,550. The plan requires no coinsurance or co-pays for emergency or primary care after meeting the fairly steep $6,550 annual deductible. For $70 more a month, he can get a bronze plan through CareFirst with a lower $4,500 deductible, but there is $300 copay on emergency care and $25 co-pays for primary care.
A quick check of eHealthInsurance shows 30 plans in all to choose from, five of which have a premium under $200 a month. The same CareFirst plan available through Joe’s state health exchange is the cheapest here, too.
Unless Joe decides to go with a short-term medical plan that doesn’t comply with ACA requirements, his cheapest option is the $166-a-month, $6,550 deductible CareFirst plan through his state health care exchange. If he anticipates a significant amount of health care expenses, he will probably want to consider paying a bit extra for the plan with a lower deductible, however.
Case Study #2: Monica, 29
Monica is a divorced 29-year-old mother of a 7-year-old boy in Indianapolis. She makes $40,000 a year through two part-time jobs that don’t provide group health coverage.
Indiana uses the federal health exchange. On that site, Monica learns her child may be eligible for coverage through CHIP or Medicaid. She is shown 68 plans, the cheapest of which is a bronze IU Health plan with a $213 monthly premium and a $6,500 yearly deductible. There is no charge for emergency care, primary care, or prescriptions after she meets the deductible. For about $8 more a month, she can get a plan with a much lower deductible, $4,500, but it has a $250 emergency copay, 30% primary care coinsurance, and a $16 copay for prescriptions.
Monica checks eHealthInsurance and finds 41 plans. Her cheapest option there is a bronze plan through Ambetter for $231 a month. There is no charge for primary or emergency care after meeting a $6,800 deductible.
Unless Monica decides to go with a short-term medical plan that doesn’t comply with ACA requirements, her cheapest option is the $213-a-month IU Health plan she found on the federal health exchange.
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Finding Cheap Medical Insurance
Health care reform has made finding insurance more straightforward, but there’s no guarantee that what you find on the state or federal health exchanges will be your cheapest option. Shopping around is still important as you evaluate your options. Our online quote tool will help you begin searching for cheap health insurance providers in your area.