If you don’t get health benefits through your employer, you’ll have some decisions to make during the annual health insurance open enrollment period.
First, should you enroll or not? Now that the federal tax penalty has been eliminated, you can technically go without health insurance in most states without accruing a tax penalty, or enroll in non-ACA coverage if that better meets your needs and budget.
If you do go ahead with major medical coverage (probably a wise choice) should you automatically re-enroll in your current policy or shop around for a new plan? (If you purchased coverage through the ACA marketplace, your policy may be automatically renewed if you do nothing.1)
And finally, where should you get your major medical policy – from a public Exchange (healthcare.gov or your state’s ACA website) or the private marketplace?
Though it may be easy to stick with your current insurance (in many cases if you just do nothing your coverage will be automatically renewed), it can be worth your while to compare other options to make sure you’re getting the best coverage for you.
We’ll cover some common issues you may encounter if your health plan changes in the coming year and potential options and next steps to take if:
- Your healthcare needs changed
- Your plan’s coverage changed
- Your income changed
- You policy is being discontinued
- Your new deductible or premium is too high
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First, review your current coverage
You will typically receive a letter from your health insurance company sometime in October.3
This letter notifies you of the annual open enrollment period and any changes you should be aware of regarding your existing policy.4
If you get your coverage through the ACA Marketplace and are receiving a subsidy, you’ll receive a second letter. This one is from the Marketplace and will provide additional information about updating your financial information.5
Letting your health plan automatically renew may not be in your best interest. Why?
Because several things can impact whether or not your current coverage remains a good fit next year:6
- Your premiums or deductible may have gone up
- Your coverage may have changed, e.g., providers may have exited your network
- There may be a new (higher) annual out-of-pocket maximum
- You may require more healthcare this year than last
- Your income may have changed (perhaps you qualify for a subsidy)
- Your policy’s cost sharing structure may have changed
Let’s talk about some options depending on different needs and situations.
Your healthcare needs changed
If you were diagnosed with a chronic health condition within the last year, for example, or suspect you may need more healthcare services in the coming year, you may want to move towards a health plan with a cost-sharing structure with a lower deductible and higher premium.
You’ll be paying a larger bill each month for your premium but you’ll likely be able to pay down the smaller deductible faster in order to begin having the health insurance company share a portion of covered healthcare costs with you.
Remember, it’s just the cost-sharing percentages that differ between the plan levels. There is no difference in quality of care, and all plan categories provide free preventive care and some free and discounted services before you meet your deductible amount.7
Your plan’s coverage changed
You may find that your plan’s drug formulary has changed and no longer covers a medication you rely on.
Or your doctor may no longer participate in your plan’s network. This is a problem that is increasingly common since a majority of ACA health plans have more restrictive HMO or EPO networks. In fact, the percentage of Exchange plans with narrow networks keeps increasing, from 60% in 2016 to 72% in 2019.8
If your plan’s coverage has changed in ways that negatively impact you, you’ll need to decide if you can adjust and stick with your existing plan. For example, can you find a new in-network provider or switch to a different drug or a generic version that is included in the formulary?
If that’s not possible, you will need to look for a different health plan that better meets your coverage needs.
Your income changed
If you previously didn’t qualify for an ACA subsidy but your income is lower this year, you may now qualify. If you added dependents to your household by having a baby or adopting, you may also qualify even if your income didn’t change.
Alternatively, if you had a subsidy last year but your income went up or a dependent aged off your policy, you may not qualify this year.
If you take tax credits that you’re not eligible to receive, even if you received them accidentally, you’ll have to pay them back when you report your income and file your taxes for the year.9
If you currently receive a subsidy
If you’re enrolled in an ACA plan and receive a subsidy you need to address your financial information as part of your insurance open enrollment.
It’s generally a good idea to manually update your financial assistance information regardless of whether or not you’ve opted to have the Marketplace automatically re-verify your income each year. It’s a good way to ensure that the information is as accurate and up-to-date as possible.10
And if you did not opt for automatic reverification you’ll definitely need to make the updates yourself.11
It’s important to keep your financial information updated since if you had a higher income than reported, you will have to pay back any advance premium tax credits you received. If your income is less than reported, you’ll be paying more in premium each month than you would otherwise have had to.12
When you reapply for financial assistance, the Marketplace will calculate your new subsidy, then you’ll need to select a plan. If your existing plan is available and you liked it, you can re-select that plan again for the coming year.13
The process for updating your financial information may vary by state, and your state should provide you the information you need and steps to follow.14
Your policy is being discontinued
If your annual letter from your insurance company indicates that your policy is being discontinued, you may want to shop around and compare other plans rather than letting the Marketplace choose a plan for you.
If you don’t enroll in another policy and simply let your current coverage “renew”, one of two things may happen:
- If your insurance company continues offering qualifying health plans, you may be automatically enrolled in the lowest cost option that company offers that most closely matches your current coverage.
- If your insurance company is exiting the ACA Marketplace entirely, the Marketplace will try to pick the lowest cost plan that is similar to your coverage that is being discontinued.15
Your new deductible is too high
There’s no doubt that deductibles have consistently trended up over the last decade or so. For example, deductibles for group medical plans have increased 212% between 2008 and 2018.16
If you find that your policy’s deductible is no longer affordable, you have a couple of options to consider:
- Consider a major medical plan with a different cost-sharing structure, e.g., a silver plan has a lower deductible than a bronze plan.
- Get a qualifying high deductible health plan and enroll in a health savings account.
- Get supplemental health insurance like a medical gap plan.
Major medical plans and metal levels
The four ACA metal level tiers represent how covered medical costs are shared between you and the insurance policy. It has nothing to do with the benefits level provided.17
For example, a bronze plan and a gold plan cover the same healthcare services: both cover the same preventive healthcare services and neither has an annual or lifetime benefits limit on essential health benefits.
The difference is that the bronze policy will have the lowest monthly premium and highest annual deductible and the gold plan will have higher monthly premiums and a lower annual deductible.18
It’s a question of where you’re allocating costs: spending more on a predictable monthly premium payment or more in the form of your deductible that you’ll pay if you need healthcare services.
By changing from a higher deductible plan (like a bronze plan) to a plan with a higher monthly premium (a gold or silver plan) you can lower your annual deductible even though you may not lower your overall insurance or healthcare costs. Learn more about the metal levels.
High deductible health plans that qualify for HSAs
How can a health savings account (HSA) help with a high deductible? Funds from your HSA can be used to help pay for a variety of healthcare-related costs, including your deductible payment.
For coverage year 2020, a high deductible health plan (HDHP) is defined as one with an annual deductible of $1,400 or more for an individual and $2,800 or more for a family.19 In order to open an HSA you must be enrolled in a qualifying high deductible health plan.
Why might you open a health savings account (HSA)?
- You can deduct the amount you deposit in your HSA from your annual federal income taxes.
- Your HSA is a financial investment that you maintain for however long you wish, and if you have funds there when you turn 65, you can spend the money on anything.
- Up until you turn 65, you can use HSA funds to pay for deductibles, copayments, coinsurance, and other qualified medical expenses.
- When you withdraw your HSA funds for qualified expenses you’re not taxed.
- Unspent HSA funds roll over from year to year and can earn tax-free interest, so if you are able to build up a robust HSA it can help you with insurance and medical costs for as long as you maintain the fund.20
A couple of caveats:
- You need to verify that a health plan you’re considering is a qualified “high deductible health plan.” If not, you won’t be able to enroll in an HSA.
- HSAs have annual deposit limits. For coverage year 2020 it’s $3,550 for self-only coverage and $7,100 for family coverage.21
Supplemental medical gap insurance
Supplemental insurance, called gap health insurance, provides additional benefits for covered medical costs.
Gap coverage provides fixed-cash benefits when a covered accident or illness occurs (meaning you get a lump sum).
You can use the money any way you wish, to pay for medical bills, household expenses or your major medical policy’s deductible or other out-of-pocket costs.
Find out how much a gap health insurance plan could cost you.
Your new premium is too high
If you’re facing a higher premium in the upcoming coverage year, consider the following:
- See if you qualify for premium tax credit even if you didn’t qualify last year.
- Shop around for a new major medical plan – you may be able to find plans from other carriers with lower premiums.
- If you don’t qualify for a subsidy, expand your search beyond the ACA Marketplace – you’ll find more plan options to choose from and some may have lower premiums.
If you’re looking for a policy with, on average, 54% lower premiums than ACA-compliant plans, you could consider a short term health insurance plan.24 There are some big caveats with short term medical policies, so keep reading to make sure you fully understand this option.
Limited-benefit short term health insurance
Before we talk about what short term medical may cover, it’s important to note that there is a trade-off if you go with this option. You’ll be paying lower insurance costs but have less coverage and fewer benefits.
The important things to be aware of with short term plans are:
- Short term plans are not ACA-qualifying coverage and cover few, if any, essential health benefits
- There are typically annual and lifetime benefits limits
- They exclude things like preventive care, prescription drugs, pregnancy or pre existing conditions (to name a few)
- These plans are underwritten, meaning you need to be approved by the carrier in order to enroll
- Short term plans are not available in all states
- Your premium cost depends on the benefits you select
Short term health insurance plans:
- Provide benefits for critical illnesses or injuries for things like ambulance transportation, emergency room care, hospitalization and diagnostics
- Are generally flexible, you can add more benefits and coverage for additional premium
- Typically allow you to choose your own provider without restrictions, although there may be financial incentives for using in-network providers
- Are not subject to the annual open enrollment period so you can apply anytime in most states
- Are helpful if you need need temporary coverage while you’re in between comprehensive major medical plans
Find out if short term plans are available in your area by requesting a quote.
Summary + Next Steps
We covered a lot of potential scenarios that you may encounter when it comes time to enroll in ACA health coverage for the next year:
- Your healthcare needs may have changed
- Your plan’s coverage may have changed
- Your income may have changed
- You policy may be discontinued
- Your new deductible or premium may be too high
That’s why it’s important to closely review changes to your plan for the coming year, and assess whether or not your current coverage still fits your needs.
If you have questions or concerns about automatic re-enrollment, contact your health insurance carrier or the federal Marketplace or your state’s ACA exchange.
If you’d like help comparing options, call 888-855-6837 to speak with an insurance agent.
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