The newly self-employed might experience some sticker shock when they first select a health insurance plan from the marketplace. The Affordable Care Act (ACA) can feel like a misnomer, with plans that cost hundreds of dollars per month and yet can include significant out-of-pocket expenses. But the ACA, which passed in 2010, has helped provide coverage for millions of Americans who would not otherwise have health insurance. According to the Kaiser Family Foundation, the percentage of uninsured, non-elderly Americans dropped from 17.8% in 2010 to 10.4% in 2018. Under the ACA, you cannot be denied health insurance or charged a higher premium based on a pre-existing condition. Common examples of pre-existing conditions include pregnancy, diabetes, epilepsy, and cancer. The ACA makes it possible for individuals to purchase health insurance for themselves if they do not have access to coverage through an employer-sponsored plan or federal assistance, like Medicare.But no one really wants to deal with insurance or its endless lingo and acronyms. Below, we demystify purchasing health insurance as much as possible, starting with some basic vocabulary.
Deductible: The amount consumers pay annually out of pocket before the health plan pays for covered services. However, many services, such as primary care visits, are fully covered whether you meet the deductible or not.
Copayment: A fixed fee consumers pay for a specified service (like a doctor visit) under the terms of a health plan.
Premium: The monthly payment consumers pay for health insurance coverage.
Cost-sharing: A portion of the plan’s cost that the consumer pays. Deductibles and copayments fall into this category.
Out-of-Pocket Maximum: The maximum amount a consumer can pay out-of-pocket in a given year for covered services. It includes deductibles, copayments, and cost-sharing.
Tax breaks: If you’re self-employed, you can take a self-employed health deduction. If you itemize your deductions, you can deduct the cost of your medical and dental expenses that exceed 7.5 percent of your adjusted gross income.
Subsidies: When you select a plan, you may qualify for subsidies, such as the Premium Tax Credit or Cost Sharing Reduction programs. These are for people with low to moderate income who don’t also qualify for Medicare or Medicaid.
Two-thirds of Americans who file for bankruptcy cite their medical bills, or their inability to work while sick, as a major factor in their need to file. In 2017, one in five Americans had to choose between paying a medical bill and paying for vital household expenses. And with the ongoing COVID-19 pandemic, health is at the top of everyone's minds.
Open enrollment: You can sign up for insurance during open enrollment, which begins in November and ends in mid-December.
COVID-19: In light of the spread of the novel coronavirus, some states have opted to have a special enrollment period.
Qualifying life events: There’s a list of qualifying life events that might make you eligible to sign up outside of the open-enrollment window. Changes to your employment status or the size of your family are common qualifying life events. You can see the full list here.
The Healthcare Marketplace: The ACA created the healthcare marketplace, where you can purchase your health insurance plan. You can shop for plans on healthcare.gov. Several states operate their own marketplaces, in which case you’ll be redirected from healthcare.gov to your state’s health insurance site.
COBRA continuation of coverage: If you leave a job and are no longer eligible for an employer-sponsored plan, and the employer employed 20 or more employees, you may qualify for COBRA continuation coverage. This allows you to maintain your coverage under the employer-sponsored plan for 18 to 36 months. Keep in mind that your employer typically covers a substantial portion of the premium charged for your coverage, but under COBRA you have to pay the total premium. This often costs more than an individual plan purchased through the marketplace.
Short-term insurance: If you missed the window for open enrollment, short-term insurance can bridge the gap, with plans that offer coverage for up to 364 days. Although these plans often offer cheaper premiums than what you’ll find on the marketplace, they don’t cover much and have high deductibles that you’re unlikely to reach in less than a year. They also don’t have to follow the same rules as the federal healthcare marketplace and can deny coverage to anyone with pre-existing conditions, so these plans are only an option for healthy people.
Health Maintenance Organization (HMOs): In an HMO, a network of healthcare providers agree to provide lower-cost healthcare, but restrict where patients can access medical care covered by their insurance. With an HMO plan, you generally need to select a primary care physician, and then get a referral from your primary physician to see a specialist or receive other medical services. Common examples include immunologists, who specialize in chronic conditions like asthma and allergies, and dermatologists, who treat skin conditions. If you’re in a sufficiently populated area, with lots of options for physicians and specialists, this could be a relatively convenient and affordable option.
Preferred Provider Organizations (PPOs): PPOs have higher monthly premiums, but more flexibility when it comes to accessing healthcare. PPO plans generally cover services from providers who are not in the insurance company’s network. These are generally recommended for patients who want to regularly see specialists to treat chronic conditions. You might also want access to a wider range of doctors if you’re having a baby any time soon or are planning for surgery.
How often do you think you’ll need medical services? If you are relatively young and healthy, you may benefit from a lower-cost plan that includes a high deductible since you may only be going to a doctor once or twice a given year. But if there’s a chance that you may need frequent care, regular visits to specialists, or costly medications, going for a higher premium might be cost-effective in the long run.
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