How you should tackle getting your own insurance when it isn't offered through your work.
Health Insurance in the United States has not only been a topic of hot debate in recent years, but it is a huge source of stress for many. Whether you have coverage from your employer, but it’s taking a huge amount of your paycheck, or you’re self-employed or working for a small company that doesn’t provide healthcare benefits and you’re trying to navigate the complicated insurance system on your own, we can all agree that it isn’t fun.
Even as someone who holds an insurance license, it’s still complicated, and still frustrating. But, since health insurance is one of those things we really should have, we’re going to break it down and try to make the process of finding your own health insurance suck a little less.
The first hurdle to maneuver is knowing when you can, and can’t, enroll in a new health insurance plan.
The Open Enrollment Period and Special Enrollment Periods
The first hangup about our healthcare system is the fact that we are only allowed to enroll in a new plan 1.5 months out of the year. Open enrollment starts November 1st and ends December 15th, with coverage typically starting January 1st. This is the only time where you are allowed to shop for and enroll in a new plan- unless you qualify for a Special Enrollment Period, which we will look at shortly.
When the Affordable Care Act went into place, there was also a new penalty added for people who didn’t have coverage for the entire year. This penalty would be deducted from your tax refund or tacked on to your bill if you owed. Thankfully, this penalty has been eliminated starting with 2019 tax returns, I just wanted to take a minute to complain about it. Why have such a limited enrollment period, and then monetarily penalize people for not using it, when the main reason for not being insured is because of the cost?
Penalty or not, taking note of the Open Enrollment Period is important if you are responsible for your own insurance. Even if you currently have a policy in place, it certainly doesn’t hurt running a few quotes to see if there are any better plans you can switch to during this time.
Special Enrollment Periods
If you have encountered a significant life event that caused a change in your health insurance coverage, you will probably qualify for a special enrollment period. Common events are things like getting married, having a baby, getting divorced and losing the coverage you had from your spouse’s employer, losing coverage from a job or other plan you had, and moving. To see if your life change qualifies, check here.
Now, the important thing to note about special enrollment periods is you only have 60 days from that life-changing event to enroll in a plan. Normally when we are going through these life changes, insurance isn’t at the top of our mind. Especially if we have never navigated the system before, and are paralyzed by what we assume the cost will be.
Personally, I have qualified for two special enrollment periods in the last three years and missed both of them. BOTH. And did I mention I’m insurance licensed?! (I wasn’t licensed for the first one I missed though, but still…). When I actually got around to looking into it, when that weight of “I really should get some health insurance…” finally wore me down enough to pull up a google search, I discovered I was on day 64 or something stupidly close to the cut-off. So what does that mean? No health insurance, until the next Open Enrollment Period.
So next time you lose coverage, remember, you only have 60 days to get your next insurance policy in place.
Okay, so let’s say you’re in a time frame where you are allowed to get insured. The next hurdle: how do you find and enroll in a plan?
How to enroll in a health insurance plan
When you are buying your own insurance, you will be purchasing your insurance through the Marketplace. You can find plans online, or you could go find an insurance agent and ask them to help you. Having someone explain your options and walk you through the different policies will take a lot off the stress off- but if you go this route I would recommend seeing someone that is independent and licensed with multiple companies. If you go to someone that only sells for one company, obviously they are only going to show you those specific plans, which might not be the best option.
If you feel like you can DIY just about anything thanks to the lovely internet, I recommend using policygenius.com to run quotes (no affiliation here, just a solid resource). I love this quoting tool because they don’t force you to enter a ton of unnecessary information, and they don’t share your info with a bunch of companies that will call and email you until the end of time. They also do a good job of explaining your different options and make the insurance lingo easier to understand.
When quoting, don’t just fly by the question that asks your household income amount, or make up a number off the top of your head. This is an important question that could potentially lower your premiums, through the Premium Tax Credit.
Health insurance discount - the Premium Tax Credit
This Premium Tax Credit is a way to reduce the cost of health insurance for people whose income is under certain thresholds. This is a tax credit and can be applied directly to your monthly premiums, or given as a credit on your tax return.
Whether or not you qualify for this credit will depend on the state you live in, the number of people in your household, and your household income. To see if you qualify for any credits, use this tool.
If you do, a monthly dollar amount will reduce your premium, making it more affordable. If you are in a position where you have been putting off insurance because you feel like you can’t afford it, and your income is under the threshold, this tax credit can make a HUGE difference.
Since this is a tax credit, if you are inaccurate about your income in order to obtain the discount throughout the year, and your income doesn’t match up come tax time when you file your return, you will be expected to pay it back. Don’t fret if your income is off by a little- just know that you can’t make up your income and expect no repercussions from the IRS if your number is way off.
Choosing the plan that’s right for you
Once you get through putting in your information, you will be shown a whole list of plans. But how do you decide which is best for you, and what do all of those insurance terms mean?
First, your eyes will gravitate towards the premium. This is the cost you pay to the insurance company to be on their plan. This is normally paid as a monthly amount, and this is probably what the majority of your decision will be based on.
The cost of your premium will depend on a lot of factors; your age, location, number of people on your plan, and they type of coverage needed.
What can you comfortably afford? If you go for the plan with the lowest premium, you will probably end up on a plan that has a high deductible and not the greatest coverage. The higher the premium you can afford, the lower your deductible and the better your coverage options actually become.
What’s a deductible and coinsurance?
Your deductible is the dollar amount that you have to pay before the insurance company will pay their share. The portion that the insurance company pays is called coinsurance and is normally listed as a percentage. If you choose a plan that has 80% coinsurance, that means the insurance company will pay 80% of the costs, after your deductible has been met.
You might notice that plans are ranked in cool-sounding metallic tiers- Bronze, Silver, Gold, and Platinum, and just like your bling, these plans are not created equal. The higher up your plan, the more expensive it will be, and the more coverage you will have. Platinum normally covers 90%, Gold 80%, Silver 70%, and Bronze 60-50%.
If you're poor and healthy, you can probably go for a bronze plan, and it will probably still be expensive, but hey, at least you'll have "coverage".
If you have health problems and are in the doctors a lot, it's worth going for a higher ranking plan.
In a really depressing example, let’s say you are on a plan with an $8,000 deductible and 80% coinsurance. You have an accident and spend a few days in the hospital, racking up a $10,000 bill. For simplicity, let’s say this is your first time actually using your insurance, and you have not paid anything towards your deductible yet.
You would pay the first $8,000 of your bill in order to meet your deductible, then your insurance would kick in, and pay 80% of the remaining $2,000, or $1,600, while you are responsible for paying the remaining 20%, or $400.
You should also take note of the out of pocket maximum (OOPM) amount listed, sometimes it’s the same as your deductible, sometimes it’s higher. Once you hit that max, the insurance company will pay 100%.
Using the same scenario above, let’s say you had a $12,000 max out of pocket on your policy. So far you have paid your $8,000 deductible and $400. This means you have $3,600 left that you are responsible for paying until you have hit your OOPM. Next time you get treatment, you will still pay 20%, up until you hit a total of $12,000 spent. Then, the insurance company will cover everything.
Now we see why a large deductible and large out of pocket maximum can be no fun. And no, your monthly premiums, unfortunately, do not count towards your deductible. It’s also important to note that your deductible starts over every year.
Using the same example above, pretend your accident happened in March. Your deductible is met, and for the rest of the year, you will have the 80/20 split for ongoing costs (unless otherwise stated in your policy).
But what if this accident happened in December, and you find yourself in the hospital again in January? Time to start over and meet that $8,000 deductible again.
What’s important in the summary of benefits?
When you’re shopping insurance, make sure to compare at least a few plans, and open up the summary of benefits. The summary of benefits will break down exactly what comes with the plan, what you are expected to pay, what insurance will cover and when.
All plans now are required to cover some preventive care without a copay, coinsurance and before your annual deductible is met. This translates to at least one free well-visit a year with your primary doctor, and some other basic tests and screening. You can learn more about what’s covered here.
Other things you will want to look for in the summary of benefits is, how much will it cost you to go to the doctors outside of your one free visit? Is it a flat dollar amount listed, or do you have to pay the full cost before your deductible is met? Is it fully covered after meeting the deductible, or just a portion? What about lab work and prescription drugs? Urgent care visits, specialist visits, and hospital visits?
These are all questions you will have to ask based on your own health and healthcare needs. The cheapest plan is certainly not going to be the best plan, but it will be enough for some. Weigh your options, compare the benefits, and be sure to shop around each Open Enrollment Period to see if you can find something better, especially if your life and health situation has changed.
This is a complex topic, and there is still plenty that could be covered, so if you have questions please feel free to contact me here!