So what do you do if you earn too much to qualify for a health insurance subsidy but not enough to offset the costs of rising health insurance premiums, deductibles and healthcare costs?
You may have some options depending on your healthcare needs and finances…but it’s important to be careful when considering health insurance that is not ACA-compliant.
We’ll talk about two approaches below, one that may help with a high deductible major medical plan, and a non-ACA coverage option that provides limited benefits and less coverage for a lower monthly premium to those that qualify.
Can’t Afford ACA Coverage?
You’re not alone if ACA coverage feels unaffordable, especially if you’re a middle-income individual or family.
For coverage year 2021, a family of four living in one of the 48 contiguous states or D.C. qualifies for a premium tax credit, cost-sharing reduction, or both if they have a household income between $26,200 and $65,500 (100% to 350% of the Federal Poverty Level (FPL)).
If the family’s income is under $26,200, they may instead qualify for Medicaid depending on the state they live in. Conversely, if their income is over $104,800 (400% FPL) they don’t qualify for any financial assistance for health insurance. (Locate your income in the ACA Income Limits table.)
The ACA “Subsidy Cliff”
Middle-income earners may find themselves in a tough spot when it comes to paying for health insurance premiums on their own. ACA subsidy eligibility it cutoff at 400% of the Federal Poverty Level – there is no gradual phase-out. So if you’re close to that line but on the “wrong” side of it, even by a small amount, it could make ACA premiums unaffordable for you.
In 21% of US counties in 2019, a 40-year old making $50,000 annually paid more than 10% of their income on premiums for the lowest-cost plans available on the public Marketplace because they did not qualify for a subsidy.
For older people, the disparity is even starker. A subsidy-eligible 60-year old with an income of $45,000 spent 3% of their annual income for their bronze plan premium in 2019. If that same individual made $50,000 and was not subsidy-eligible, they paid 17% of their income for the same plan.
What’s “normal?” As a point of comparison, according to the Bureau of Labor Statistics, in 2019 (the most recent year for which this data is available), the average American household spent 5.6% of their annual income on health insurance costs, or $3,529 annually.
If you’re a middle-income earner and do not qualify for a subsidy it’s worth shopping around for ACA-compliant major medical insurance away from the public Marketplace or identifying a non-ACA-qualifying option if it fits your individual timing, health, and budget needs.
Get the Best Deal on Your Qualifying Major Medical Plan
Your first stop for affordability is comparing major medical insurance plans from multiple carriers. Major medical insurance is the most comprehensive health coverage option available, so if you can afford it, it’s likely the best option.
When you don’t qualify for health insurance assistance, it makes sense to comparison shop for these plans outside of the HealthCare.gov website or your state’s exchange.
How does buying off the Exchange result in savings? Well, it may not. But typically a smaller number of insurance companies offer a more limited number of plans on the public Exchange compared to what is available from these same companies and others off the Exchange. Going off-Exchange may provide you with additional carrier, plan and network options, which can result in savings or convenience.
Three common sources for major medical insurance sold away from the public Exchange are:
- Online health insurance agencies such as ehealthinsurance.com that quote and sell policies from different companies. Learn more about how to safely shop for health insurance plans online.
- Licensed health insurance agents or brokers in your area. Learn more about health insurance agents or work with a Health eDeals agent by calling (888) 855-6837.
- Directly from an insurance carrier or company (e.g., Blue Cross Blue Shield) by visiting their website or contacting them.
These plans are all guaranteed issue and premiums are based on a standard list of factors (age, location, tobacco use, whether it’s individual or family coverage, and plan category/metal level) as opposed to individual
Whether you ultimately purchase on the Exchange or not, in order to pay a lower monthly premium, you may be facing a plan with a higher deductible. If that’s your situation, there may be options for helping with out-of-pocket costs.
Let’s look at a couple of them.
Supplemental Health Insurance
It may seem contradictory to buy additional health insurance when you feel financially strained, but that could be one solution. Supplemental medical insurance options include:
Findings suggest that although the ACA helped more people get coverage, the combination of increasing medical costs and stagnant incomes continues to put people at risk of bankruptcy if they become sick or injured, even with comprehensive major medical coverage.
Gap Health Insurance
Supplemental products known as medical gap insurance pay a lump sum benefit for covered critical illnesses such as cancer or a heart attack, to name a few. You can assign benefits directly to the hospital, or receive the funds and use them to cover other healthcare expenses, rent, groceries, childcare, or other living expenses.
If you need cancer treatment that costs $30,000, your gap policy will likely payout in full ($10,000) and will then be exhausted. Your major medical plan will pay their portion of the $30,000 bill regardless of your gap policy benefits (the benefits for the two policies do not coordinate).
Is a medical gap plan right for you? Compare policy costs and coverage.
Hospital Indemnity Insurance
Hospital indemnity plans are a form of supplemental fixed benefit (or “fixed indemnity”) coverage. Hospital insurance is not considered ACA-qualifying minimum essential coverage, and in some states you must already have a major medical policy in order to enroll in a hospital plan.
These benefits help pay for expenses relating to hospitalization and inpatient services such as room and board, physician’s visits while hospitalized, and inpatient surgery to name a few. Because plans are highly customizable, you may be able to opt for additional coverage for some outpatient services as well.
If you become injured and require a $6,000 surgery and 2-day hospital stay that costs $3,000 per day, for a total of $12,000 in covered expenses, your hospital plan will pay a single $2,000 surgery benefit and $2,000 worth of confinement benefits ($1,000 x 2 days) for a total benefit payout of $4,000. That leaves you with $8,000 in remaining costs.
As with gap insurance, benefits do not coordinate with your major medical plan. So if you’re supplementing your major medical policy with hospital benefits, the additional benefits can help when it comes time to pay your major medical out-of-pocket costs.
If you’re using a hospital indemnity insurance policy by itself, you’ll be responsible for any additional costs beyond the fixed benefit amount indicated in your policy.
Is a hospital indemnity plan right for you? Compare policy costs and coverage.
Non-Qualifying Health Insurance
If you don’t have an ACA-compliant plan, are you prepared to pay fully out of pocket for unplanned healthcare needs? Even if you’re young and “healthy,” going without comprehensive major medical insurance could be risky.
Healthcare costs can easily reach tens of thousands of dollars (or more) for hospitalization, surgery or critical illness care. Because of the high costs you could incur as the result of a serious car accident or a chronic or critical illness diagnosis, major medical insurance is the best option if you want to ensure you’ll have coverage without benefits limits if you need it.
But if you’re still thinking about going without coverage you may want to consider a short term health insurance policy in order to provide some level of temporary benefits for unexpected care and treatment.
Let’s look at some of the potential features and limitations of these types of plans…
Short Term Medical Insurance
Short term health insurance is a temporary, limited benefit option that does not cover pre-existing conditions, is not guaranteed-issue (meaning you need to be approved by the carrier to enroll), and does not necessarily include coverage for the essential health benefits. In addition, short term policies include benefits limits (i.e. annual benefits maximums). Because of these limitations and exclusions, premiums may be lower.
What does short term medical cover? Short term health insurance provides some benefits for costs related to hospitalization, emergency room care, ambulance and surgical services, diagnostic services, and doctor visits. Because policies tend to be highly customizable, you can often purchase additional coverage for additional premium.
It’s important to read and understand the short term coverage and benefits you’re getting, as well as exclusions and limitations, before enrolling in one of these policies.
Short term medical policy term and duration limits: It’s also important to note that these types of plans are not available in all states, and each state regulates short term policies differently. You can enroll in a short term plan if you qualify for as little as 30 days or, depending on state, as many as 364 days.
Is short term health insurance right for you? Compare policy costs and coverage.
Health and Medical Discounts
Whether you enroll in a major medical plan or choose a non-ACA-compliant limited-benefit health insurance like short term health insurance, you may want to consider purchasing a health and medical discount plan.
Discount plans may help lower your out-of-pocket costs, add convenience, or expand your access to healthcare specialists in the event you have a narrow network plan. You can get discounts on:
- Prescription drugs
- Home-use medical supplies
- Healthcare specialists like nutritionists and physical therapists
- Complementary + alternative healthcare services like massage or acupuncture
Other services, like telemedicine and expert medical administration, referral and negotiation services, may add convenience.
There is no medical underwriting or qualification process, so anyone can purchase a health discount plan for themselves or their family. Note that health and medical discount plans are not insurance, and discounts cannot be used in conjunction with health insurance benefits.
Ready to get health and medical discounts?
Summary + Next Steps
We covered a lot of ground in this article. The bottom line is if you don’t qualify for an ACA subsidy and you’re worried about going over the “subsidy cliff,” keep the following options in mind:
- Get the most affordable ACA-compliant (major medical) plan you can by shopping both on and off the ACA Exchange to expand your plan and carrier options. Shop the ACA Exchange.
- Supplement your high-deductible major medical plan with a medical gap or hospital indemnity policy to help with out-of-pocket expenses.
- Can’t afford ACA coverage? Don’t go uninsured. If you qualify, enroll in a limited-benefit option like short term health insurance if it meets your needs and is available in your state. Add additional insurance and discount products to increase coverage or savings:
Still not sure how to proceed? Call (888) 855-6837 to speak with an agent who can answer your questions and help you get the right coverage for your needs.