What to Do If Your Employer Health Insurance is Too Expensive

Sarah Sullivan
December 8th, 2020 December 8th, 2020 |
Read time: 7 minutes

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For most, employer-provided health insurance is a welcome benefit and a relief, but what happens when your employer offers health insurance and you can’t afford it?

If you feel like your employer health insurance is too expensive, it could be because premiums and deductibles for group health insurance policies are on the rise.

The Kaiser Family Foundation’s 2020 Employer Health Benefits Survey showed that, on average, premiums increased 4% over the past year for both individual and family coverage.[1]

In 2020, on average, worker wages increased 3.4% and inflation increased 2.1%.[2] However, the average single annual health insurance deductible has increased 25% from 2015 to 2020, and 79% from 2010 to 2020,[3] leaving a lot of people wondering how to afford their employer’s high deductible health plan.

If that sounds familiar, you’re not alone.

According to Bloomberg, in 2018, 39% of large employers only offer high-deductible health plans (up from just 7% of employers in 2009),[4] and half of all workers now have a health insurance deductible of at least $1,000 for an individual.[5]

So, what can you do if you feel like your employer health insurance coverage is too expensive and you’re not sure you can afford it in the year ahead?

We’ll consider two non-group options:

We’ll also talk about ways to help with out-of-pocket costs, such as health savings accounts (HSAs) and supplemental health insurance.

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Can You Choose an Individual ACA Health Plan Instead?

Can you just forego your employer’s group health plan and opt instead for an individual or family ACA plan from healthcare.gov or your state’s ACA Exchange?

Technically you can do this.

But you won’t be eligible to take advantage of premium tax credits or cost-sharing reductions regardless of whether or not your income would otherwise qualify you as long as your employer’s health plan is considered “affordable” and meets “minimum value” standards.[6]

And remember, with most job-based health plans, your employer pays a portion of your monthly premium – in 2020, large employers paid on average 83% of an individual’s premium cost[7] – and may even contribute to a health savings account (HSA) if you have a qualifying high deductible health plan (more on that later).[8]

One or both of these factors may mean you’ll be facing higher premium costs for an ACA plan purchased on the Exchange, as opposed to enrolling in your employer’s plan.

Learn more about your options if you have access to an employer’s group plan.

When Your Employer Sends You to the ACA Exchange

What if your employer is the one sending you to the ACA Exchange?

As of January 1, 2020, any employer of any size is allowed to offer a new category of health reimbursement arrangement (HRA), called an “Individual Coverage HRA” (ICHRA).[9]

This new type of HRA integrates with individual health insurance products such as those that you obtain through the ACA Exchange, your state’s ACA marketplace, or that you purchase directly from an insurance company.[10]

If your employer is offering you an ICHRA this year instead of the traditional group policy, here are some important things to be aware of:

  • You are not eligible for ACA premium tax credits if you’re using an ICHRA to purchase an individual ACA plan.
  • You are not eligible for ACA cost sharing reductions if you’re using an ICHRA to purchase individual coverage.
  • You must use the ICHRA funds to enroll in an ACA-qualifying health plan (not an excepted benefit option like short term medical).
  • Most individual health plans have narrow networks compared to employer plans, which can result in higher out-of-pocket costs.[11]

As with a traditional employer group plan, you can opt out of the ICHRA your employer is offering, and if your income is low enough to qualify you for ACA subsidies you may be able to access the premium tax credit by enrolling in an individual plan from healthcare.gov or your state’s Exchange on your own.[12]

Learn more about changing from job-based coverage to an ACA Marketplace plan (healthcare.gov).

Learn more about HRAs, including the recent rule change and ICHRAs.

The materials available at this web site are for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professional to obtain advice with respect to any particular issue or problem.

Should You Consider Non-Qualifying Health Coverage?

Another potential scenario you might be considering is forgoing comprehensive, qualifying health coverage entirely and instead enrolling in a non-ACA health plan like individual short term medical insurance.

But is this a good idea?

If you’re considering going this route proceed with extreme caution and be aware that short term health plans are not governed by the rules of the ACA. That means that plans don’t include the same kind of consumer protections and guarantees that ACA plans do, such as the essential health benefits.

Further, short term plans are not guaranteed issue, typically will not cover pre-existing conditions, aren’t available in all states, and include other limitations like annual and lifetime benefit limits.

That’s why it’s extremely important to understand the type of policy you’re buying, and ensure you have the type of plan that will actually provide adequate coverage to meet your health and financial needs should you need to use it.

If you’re looking for the most comprehensive coverage, an ACA-qualifying plan (either an employer’s group plan or an individual plan you enroll in on your own) is usually the best option.

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Supplemental Gap Health Insurance

Now that we’ve assessed some non-group options for health insurance, let’s discuss some options that may help make the out-of-pocket costs associated with your employer’s group policy more affordable.

The first option to consider is getting additional health benefits to help with the costs of your major medical policy deductible, coinsurance, and copayments.

Medical gap policies are a type of supplemental health insurance that works alongside your primary policy. Gap insurance pays a lump-sum benefit when you experience a covered accident or critical illness. You can use this benefit however you wish, but many people choose to put it towards their ACA plan’s deductible or other out-of-pocket costs. Learn more about gap health plans.

You can choose from different coverage levels to accommodate your budget and needs.
Plus, they are available any time of year – not just during open enrollment.

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Health and Medical Discounts, Telemedicine

You may already have access to telemedicine as part of your employer’s health benefits, but if not, it can be an affordable way to access healthcare for certain types of medical issues conveniently and safely from home. Telemedicine is not health insurance.

Telemedicine provides 24/7 access to board-certified physicians, which is useful for diagnosis and treatment of non-critical conditions such as urinary tract infections, ear infections, allergies, cold and flu—the physician can even prescribe medications, if needed.

Depending on your copay amount, how often you utilize doctor’s office or urgent care visits for certain types of issues, and how close you live to in-network providers, you may find telemedicine to be a convenient and affordable supplement to your employer’s health plan.

Health and medical discount plans and telemedicine are available year-round and are guaranteed issue so no one is denied access due to health history. Remember, telemedicine is not insurance.

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Health Savings Accounts (HSA)

A health savings account allows you to save money on a pre-tax basis and use it later to pay for qualified medical expenses that you would otherwise have to pay out-of-pocket.[13] HSA funds carry over from year to year, and some earn interest. You can even save the funds and use them when you retire.

What qualifies as a high-deductible health plan (HDHP) and the HSA contribution limit changes from year to year.

For 2020, these amounts are as follows:[14]

Self-Only Coverage Family Coverage
HDHP $1,400 minimum deductible $2,800 minimum deductible
Contribution Limit $3,500 $7,100

You can only enroll in an HSA if you have an HSA-compatible high-deductible health insurance plan. The deductible alone is not an indicator of an HSA-compatible HDHP, rather the plan must qualify to be paired with an HSA.

If you’re not sure if your health insurance is HSA-compatible, you’ll want to contact a human resources professional at your company or the health insurance company that administers your policy to find out what type of policy you have. If you have questions about HSAs and taxes, you’ll want to consult with a tax professional.

Learn more about HSAs.

Summary + Next Steps

As we discussed in this blog post, if you have access to employer-based benefits, especially a qualifying group health plan, that’s probably your best option in terms of both cost and coverage.

But you may still be looking for ways to make healthcare more affordable this year, after all, even with employer help to pay premiums, high out-of-pocket costs can present a real challenge when it’s time to actually use your policy.

Medical gap insurance, telemedicine (not insurance), and health savings accounts may be able to help reduce or provide additional benefits for out-of-pocket healthcare costs.

Want one-on-one help understanding your options? Call 888-855-6837 to speak with a licensed agent.

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Originally Published On July 7th, 2017
Independence American Insurance Company and/or Madison National Life Insurance Company, Inc. may underwrite the products referenced on this website. Legal Disclaimers.

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