Health insurance premiums ran about $645 per person per month in the U.S. in 2021, leaving many people to wonder whether a health plan exists that they can afford. Medicaid is the cheapest health plan you can get. It provides free or low-cost coverage to those who qualify.
- Medicaid is the cheapest form of health insurance, but if you don't qualify there are many other options available.
- The Affordable Care Act (ACA) established tax subsidies to fund plans through an exchange called the Health Insurance Marketplace.
- ACA-based health plans are managed at the state level, and the specific plan you choose will have its own rules and coverage details.
- If you're in a bind, a short-term plan can offer needed coverage at a cheaper rate, but these are usually limited in scope.
- Combining health care plans to save money can be done, but it is complex and not always advisable.
What if You Don't Qualify for Medicaid?
Don't panic if you don’t meet the rules for Medicaid. You do have other options. Health care expert Shelby George, CEO of PERKY, a firm that helps employers educate employees about benefits, warns to be cautious about signing up for a plan without first doing your research. “There’s so much jargon, complexity, and misunderstanding in the health insurance world,” she says. “It’s become just like shopping for a car. Spend the hours you need to know what you’re getting for what you’re paying.”
Keep some key points in mind when you search for a health plan that you can afford.
Medicaid: It's free or very low-cost if you qualify
An IRS tax credit that can offset or even cover the cost of a plan
A cheap, short-term plan, because IRS rules changed to allow you to keep one of these for up to one year
Plans that claim to be low-cost but aren't
Income limits that could disqualify you from Medicaid
The limited coverage of short-term policies
The fine print: Plans often have complex rules and many exclude certain care
Can You Get a Health Plan for Free?
Many people pay nothing if they qualify for the Affordable Care Act’s (ACA's) premium tax credit subsidy. This tax credit is taken in advance to lower the amount of each monthly health premium you must pay, although it goes straight to the insurer.
You must apply for a plan through the Health Insurance Marketplace to be eligible for the premium tax credit. If your state has its own exchange, check the website to see which tax credits are available.
The amount you receive will depend on the household income that you disclose when you apply. If you make between 100% and 400% of the federal poverty level (FPL), you'll qualify for subsidies on health plans that you can buy through the Health Insurance Marketplace, the federal government's program for buying ACA plans. If you made over 400% of the FPL, you might have qualified for subsidies in 2021 and 2022, thanks to the American Rescue Plan. Even if your income was too high in prior years. you may be eligible for tax credits for 2022.
You must file a tax return at the end of the year to reconcile your income with the tax credit you received. You may have to pay back some of the tax credit that lowered your costs if you ended up with more income than you thought you would have when you first applied.
You won't have to pay back any excess tax credit you received in 2020, because the IRS has waived this rule for just this one tax year.
The Marketplace will send the credit directly to your insurer to be applied to your monthly plan premium. You may not have to pay out of pocket at all for health care costs in some cases.
Rules and costs can vary by state, but this option bears looking into before you settle on any other.
Is a Short-Term Plan for Me?
The Trump administration proposed a plan on Feb. 20, 2018, that would loosen the regulations on short-term health plans. The Obama administration had capped these plans at 90 days, but the 2018 rule allows short-term policies of up to one year.
Although these plans don't cover you for pre-existing conditions that you may have had before you purchased the plan, you’ll be covered for the rest of the year if you develop a condition during this term.
Short-term plans limit benefits, compared with plans offered on the state ACA exchanges. They limit maternity care, substance abuse, and mental health, and people with pre-existing conditions can be denied. They cost less than comprehensive policies without a subsidy on the whole. For example, a 35-year-old woman living in Arizona could purchase a short-term health plan with a $5,000 deductible for $96 per month in 2022, according to The IHC Group.
Can I Combine Health Plans?
You can try mixing indemnity insurance, designed to pay a set percentage of the health provider's fee if you’re hospitalized or in an accident, with a short-term medical plan that can let you go to the doctor a few times a year for more minor ailments.
In her former role as senior vice president of advisor services at Manning & Napier, Shelby George noticed people trying to rig these set-ups on their own, sometimes with poor results. They had to file every claim with all insurers so that every dollar could be recouped. That was complex, so the company rolled out combo plans with single insurers to make the claims process smoother.
Still, eHealth's Nate Purpura notes that you have to take heed of two things when choosing health plans:
- Is the plan underwritten based on your health, or is it guaranteed issue, so it must enroll you regardless of your age, health status, or other factors?
- What does the plan cover if you have to be hospitalized?
Always make sure you know what you’d get, before choosing a health plan.
Frequently Asked Questions (FAQs)
Is Obamacare still in effect?
"Obamacare" is another term for the Patient Protection and Affordable Care Act, or ACA for short. It became law in 2010, under then President Barack Obama, with the goal of making health care and coverage more affordable and accessible for everyone. Though many parts of the ACA have been modified over time (including the removal of individual mandate and penalty for not having insurance), the health exchanges that the ACA set up are still a robust part of the country's health care system.
What is open enrollment?
Open enrollment is a span of time each year when you can change your health plan or sign up for a new one. This term is used in the context of workplace benefits, such as if you have employer-sponsored health plans available as part of a benefits package, and for the health exchanges of the ACA. Open enrollment for the ACA began Nov. 1, 2021, and closed Jan. 15, 2022, though deadlines and specifics will vary by state and are subject to change each year.