Everything You Need to Know About Choosing an Affordable Care Act Health Insurance Plan

This article is a special guest post from Policygenius.

Open enrollment for a Healthcare.gov plan ends soon (you can see if your state has any extensions in this state-by-state guide to open enrollment). The sticker prices for many individual plans might seem high, but many people don’t realize they qualify for help paying their premiums.

These subsidies come in the form of tax credits, which offset the cost of premiums, and cost-sharing reductions, which help pay for out-of-pocket medical expenses. For some people, they can make health insurance effectively free.

Here’s how these subsidies can help you save.

Who qualifies?

For 2019 plans, whether you receive a subsidy depends on how much income you expect to make in the new year. You qualify for a premium tax credit if you earn one to four times the federal poverty level (FPL). The FPL is $12,140 for one person or $25,100 for a family of four.

You qualify for cost-sharing reductions if your income is one to two-and-a-half times the FPL. Premium tax credits apply to any plan purchased on the marketplace, while cost-sharing reductions only come with plans in the silver category.

How subsidies work

The amount of your premium tax credit depends on your projected income. The more you expect to earn, the lower your subsidy and vice versa. Depending on your income, you can choose to have the credit applied directly to your premium each month. However, if your actual income ends up different from your projected income, you may receive a charge or a refund when you file your tax return.

Let’s say you’re applying for 2019 health insurance on the federal marketplace and you project you’ll make $20,000 in the new year. You’ll receive a premium tax credit based on that amount. You can apply that credit in advance to your annual premium. But if you get a raise and your 2019 income ends up higher, you’ll qualify for a smaller credit and you’ll have to pay the difference when you file your tax return.

The size of your credit may also change if you gain or lose family members.

If you qualify for cost-sharing reductions, you’ll see lower out-of-pocket costs on a Silver plan. That means the deductible (the amount you have to cover before the insurance plan starts to pay for medical care), copayments and coinsurance (the payments you make when you get care), and out-of-pocket maximum (the total amount you could owe in a year) will be lower. Like premium tax credits, the size of these discounts depends on your projected income.

How to compare plans

The marketplace will estimate how much aid you’ll get based on your income information. Once you know that, you can decide which plan to get. Plans come in three main tiers: Bronze, Silver, and Gold.

They each offer the same level of care, but differ in how costs are split. Bronze plans have the lowest premiums and the highest deductibles, so you’ll pay less up-front and pay more when you use medical services. Gold plans have higher premiums but lower deductibles, so you’ll pay more each month but your insurer will cover more of the cost of medical services. Silver plans fall somewhere in between, and include cost-sharing reductions if you qualify.

The most you’ll pay out-of-pocket under a marketplace plan in 2019 is $7,900 for an individual and $15,800 for a family.

High-deductible health plans allow you to use a health savings account, a tax-advantaged savings account that helps pay for out-of-pocket health costs.

When comparing plans, pay attention to the premium. This represents the minimum you’ll pay for health care in 2019, regardless of whether you use any medical services. Also take note of the deductible. This is what you must pay before insurance covers any medical services (aside from annual checkups and other preventive care).

The plan with the lowest combined premium and deductible is often the best financial choice, but you also need to take into account each plan’s network. Different plans have different networks, which means they’ll only cover certain doctors. If you prefer going to a certain doctor, make sure they’re in your plan’s network. Using out-of-network services is usually much more expensive.

If you expect to have big medical expenses in 2019, make sure you also pay attention to each plan’s out-of-pocket maximum. That’s the most you can expect to pay on top of the premium before insurance begins covering 100 percent of your medical expenses.

Choosing an ACA plan can be a complex decision. The best choice for you will depend on your health and financial needs.

If you can’t find a workable plan on the marketplace, there are other options. You may qualify for Medicaid in your state. The rules are complicated, so check out our state-by-state guide. You may also want to explore health insurance alternatives like short-term health plans or limited benefit plans.

You might be tempted to skip health insurance altogether. Unlike in past years, you won’t face a fine for doing so in 2019. But there can be unpredictable financial consequences to going without insurance, so we recommend everyone gets some kind of coverage.

Myles Ma is the managing editor at Policygenius.

Photo by rawpixel on Unsplash.

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