Health insurance premiums ran about $623 per person per month in the U.S. in 2020, 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.
Don't panic if you don’t meet the rules for Medicaid. You may have other options, but be cautious about signing up for a plan without first doing your research, warns healthcare expert Shelby George, CEO of PERKY.
“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 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 the subsidy and purchase a plan through your state’s health insurance exchange, also known as the Health Insurance Marketplace.
The amount you receive will depend on the household income that you disclose when you apply. You must make between 100% and 400% of the federal poverty level to qualify.
The American Rescue Plan allows more households, including those with incomes over 400% of the poverty level, to qualify for subsidized health plans through the Marketplace in 2021 and 2022. You may be eligible for tax credits in these years that lower the cost of your health plan, even if your income was too high in prior years.
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 at the time 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 February 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, explains Nate Purpura, vice president of marketing for strategic partnerships at health insurance company eHealth.
Short-term plans limit benefits compared with plans offered on the Affordable Care Act marketplaces by each state. They limit maternity care, substance abuse, and mental health. And people with pre-existing conditions can be denied.
But they cost less than comprehensive policies without a subsidy on the whole. A 35-year-old could purchase a short-term health plan with a $5,000 deductible for about $100 a month.
Can I Combine Health Plans?
You can try mixing indemnity insurance, designed to pay a set daily benefit if you’re hospitalized or in an accident, with a short-term medical plan that can let you get 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’re getting for what you’re paying before choosing a health plan.