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-compliant 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 or directly from an insurer that offers ACA-compliant coverage, your policy may be automatically renewed if you do nothing.)
And finally, where should you get your major medical policy – from a public Exchange (HealthCare.gov or your state’s ACA website) or directly from an insurer in the private market? (To clarify, the plans sold through public exchanges are offered by private insurers. It’s only the enrollment platform that’s government run.)
Ready to shop health plans on the ACA Exchange?
Though it may be easy to stick with your current insurance (in most 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 your needs.
We’ll discuss 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 have changed
- Your plan’s coverage is changing
- Your income has changed
- You policy is being discontinued
- Your new deductible or premium is too high
Make sure you have next year’s coverage lined up to begin January 1. If you have an unavoidable gap in your coverage of a few weeks up to several months, short term health insurance may be able to help.
First, Review Your Current Coverage
You will typically receive a letter from your health insurance company sometime in October. This letter notifies you of the annual open enrollment period and any changes you should be aware of regarding your existing policy.
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.
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:
- Your premiums or deductible may be going up
- Your coverage may be changing, e.g., providers may be joining or exiting the plan’s network or the health plan’s formulary may be changing
- There may be a new (usually higher) annual out-of-pocket maximum
- You may require more healthcare than you did last year
- Your income may have changed (perhaps you qualify for a subsidy)
- Your policy’s cost sharing structure may be changing
Let’s talk about some options depending on different needs and situations.
Your Healthcare Needs Have 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 that has 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.
But it’s also important to understand that sometimes, a plan with a higher deductible and out-of-pocket costs might end up being the best option when you’re facing significant medical expenses.
This is because you need to account for both the premium and the plan’s cost-sharing when you’re calculating your total out-of-pocket costs for the year. If you know you’re going to meet the out-of-pocket maximum, you can just add the premium costs and maximum out-of-pocket costs for each plan to see which one presents the best value. And sometimes the lower premiums will more than make up for the higher out-of-pocket costs. But you’ll also need to account for factors like the provider network and covered drug list when you’re picking a plan.
Remember, while cost-sharing amounts differ between the plan levels, there is no difference in terms of the essential health benefits that must be covered. And all ACA-compliant plans – regardless of metal level – provide free preventive care before you meet your deductible amount.
Your Plan’s Coverage is Changing
You may find that your plan’s drug formulary is changing and will no longer cover a medication you rely on.
Or your doctor may be leaving 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.
If your plan’s coverage will be changing in ways that will 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 Has 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.
Do You Qualify for an Affordable Care Act Subsidy?
Use the ACA Subsidy Calculator to find out if you can get financial help if you enroll in ACA-qualifying major medical insurance. Learn more about subsidies.
If you take tax credits that you’re not eligible to receive – even if you received them accidentally – you’ll have to pay back some or all of the excess amount when you report your income and file your taxes for the year.
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.
And if you did not opt for automatic reverification you’ll definitely need to make the updates yourself.
It’s important to keep your financial information updated. If you end up with a higher income than you projected — and thus received excess premium tax credit during the year — you’ll have to repay some or all of that excess amount. If your income is less than reported, you’ll be paying more in premium each month than you would otherwise have had to (although you can recoup the additional premium tax credit when you file your tax return).
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.
The process for updating your financial information may vary by state if you’re in a state that runs its own exchange. In that case, your state’s exchange should provide the information you need and steps to follow.
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.
- If you enrolled in your current plan directly through an insurance company (ie, off-exchange, which means you didn’t purchase it through the exchange) and the insurer is discontinuing all plans in your area at the end of the year, you will not have coverage as of January if you don’t manually select a new plan. This is because there is no entity to automatically transition you to another insurer’s plan.
- If your insurer is discontinuing your off-exchange plan but will continue to offer other options, they may automatically transition you to one of those options if you take no action to pick a new plan yourself. But it’s in your best interest to select the new plan that best fits your needs — keeping in mind that this may be a plan from a different insurer, or possibly a plan sold through the Marketplace.
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 increased 212% between 2008 and 2018 and have continued to climb since then. And in the individual / family market – including plans – purchased in the exchange, deductibles tend to rise over time, keeping pace with rising maximum out-of-pocket limits.
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. Somewhat counterintuitively, HSA-qualified high deductible health plans (HDHPs) have out-of-pocket maximums that are lower than the out-of-pocket maximums that other plans can have. So for example, you’ll often find that the deductibles on bronze HDHPs are lower than the deductibles for other bronze plans available in the same area.
- Find out whether you’re eligible for cost-sharing reductions, which reduce the amount of cost-sharing (copays, deductible, coinsurance) that the member has to pay. If you are, you need to be enrolled in a silver plan in order to get this benefit. If you’re eligible for cost-sharing reductions but you’re enrolled in a bronze plan, you could potentially have a much lower deductible by switching to a silver plan during open enrollment.
- 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. Out-of-pocket costs (deductible, copays, coinsurance) will tend to decrease as you move up through the metal levels. But the general array of care that’s covered will be the same from one metal level to another
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 generally have the lowest monthly premium and highest annual deductible and the gold plan will have higher monthly premiums and a lower annual deductible.
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.
And keep in mind that if you’re eligible for cost-sharing reductions (ie, your income doesn’t exceed 250% of the poverty level), you need to enroll in a silver-level plan in order to receive that benefit.
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 2023, a high deductible health plan (HDHP) is defined as one with an annual deductible of $1,500 or more for an individual and $3,000 or or more for a family, only preventive services paid by the plan pre-deductible, and out-of-pocket caps of no more than $7,500 for an individual and $15,000 for a family. In order to contribute to 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 income, resulting in a smaller federal income tax bill.
- 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. (You’ll pay taxes on it if you spend it on something other than health care. If you spend it on health care, it’s always tax-free.) 
- 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 medical costs for as long as you maintain the fund.
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 2023, it’s $3,850 for self-only coverage and $7,750 for family coverage.
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
Your premium amount may go up. ACA marketplace average benchmark monthly premiums increased every year from 2015 through 2018, although they’re decreased each year since then, dropping from a high of $481/month in 2018 to $438/month in 2022. But your specific plan’s premium won’t necessarily follow the trends for average benchmark premiums.
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 in the past. The family glitch is expected to be fixed for 2023. This will make some families newly eligible for Marketplace subsidies. And the Inflation Reduction Act has extended the American Rescue Plan’s subsidy enhancements through 2025, making subsidies larger and more widely available than they used to be. 
- 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. Depending on where you live, you may 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. 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 fewer 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
- Sometimes 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.