Should you stick with your job-based health insurance plan?
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Updated October 20 2017. For the most up-to-date information on health insurance, visit our health insurance guide.
Despite all the talk about the health insurance marketplace, most people still get their health insurance through their employers. But a big downside to accepting your job-based health insurance plan is that you don’t get to shop around – you’re limited to one or a few plans your employer offers.
Luckily, you have the right to not accept your job-based health insurance and instead choose a health insurance plan through your state’s marketplace.
While most people will probably stick with their job-based plan, there are several legitimate reasons for looking for alternative coverage on your state’s marketplace:
1. ExpenseWhile employers usually contribute some to your monthly premium, your expected contribution may be prohibitively high.
2. Excludes certain drugs or servicesYour job-based insurance plan may not cover certain prescription drugs or services you need.
3. Dependent care is too expensiveCoverage for your spouse and children is prohibitively expensive.While all three of those are legitimate reasons for wanting to consider marketplace healthcare plans, the reality is not so cut-and-dry. Like all things healthcare related, a lot of conditions have to be met before we could consider a marketplace plan to be a better value than your job-based plan.
Job-based plans are required by the Affordable Care Act to be "affordable," which means that the monthly cost for a single person’s coverage cannot be more than 9.69% of their salary. Note that affordability is not determined by how much someone might spend on their family – more on that later.
If your job-based plan is deemed affordable (and it should be – if it isn’t, you can file a complaint with the U.S. Occupation Safety and Health Administration), you won’t be able to get a premium tax credit from your state’s marketplace, even if you otherwise would’ve qualified for it. You may still be able to find cheaper plans on the marketplace even without a premium tax credit.
If you refuse to accept a job-based policy, your employer is not required to contribute any money to your marketplace insurance plan. You should expect to pay for it entirely out of pocket.
The big takeaway: most marketplace plans will be more expensive than your current job-based health insurance plan, as you’ll expected to pay for the entire cost of the policy.
Another reason to look on the marketplace for an alternative health insurance policy? Your job-based insurance plan may not cover certain drugs or services you need.
All job-based plans are required to meet a minimum value standard, which it will meet if it "pays at least 60% of the total cost of medical services for a standard population and offers substantial coverage of hospital and doctor services," according to healthcare.gov.
Even if a job-based plan meets a minimum value standard, it may not cover a specific drug or service that you need. While healthcare.gov offers an Employer Coverage Tool to help you gather information about cost, it doesn’t help employees answer questions about the specific terms of job-based policies. For that, request a copy of the summary of benefits and coverage from your HR representative. If you know you need a specific drug, ask to see the plan’s formulary (which lists all the drugs the plan covers), or call the insurer and ask.
If you need a plan with specific drug or service coverage, contact the insurance company that provides your job-based plan to see if there’s a way to expand your coverage. You may be able to get a prescription covered with an exception. If your insurance company denies the exception, you can appeal both inside and outside the company.
In healthcare lingo, dependents are classified as people other than the policyholder who get coverage through the policy. Dependents can be adults, such as spouses or partners, or children.
Most likely, your expected monthly contribution to your job-based plan will increase as you add dependents, sometimes dramatically so. As we mentioned above, your job-based plan’s affordability will not be judged based on how much it costs for dependents.
There are a few different ways you could look for cheaper coverage. You can follow the instructions above and find a new plan for all of you, specifically looking at plans that offer a cheaper premium for dependents.
Let’s say you don’t want to leave your job-based plan – maybe your employer pays 100% of the monthly premium, for example. In this case, any dependents who are 18 or older could look on the marketplace for their own plan.
If your spouse is looking for their own plan, it will not affect your job-based coverage. However, your job-based coverage will affect their search. Remember how you can’t receive premium tax credits if your job-based coverage is considered affordable? That affects your dependents, even if they’re shopping for a marketplace plan independent of your job-based plan.
In other words, even if you’d otherwise qualify for premium tax credits, no one in your family can get a tax credit on the marketplace as long as one of you has the opportunity to participate in a job-based plan that meets the Affordable Care Act’s standards for affordability.
Depending on how much it costs you to add dependents to your job-based plan, it may still be worth looking on the marketplace for an alternative health insurance policy. Many options might be more affordable than adding dependents to an existing plan.
Before you start shopping on the marketplace, make sure you know exactly why you’re looking to switch plans. Ask yourself some of the basic questions that we outlined above:
How much cheaper does your new plan need to be?
What are you willing to sacrifice in order to get a cheaper plan?
Are there other ways to get these drugs or services covered? Exhaust all of your options with your job-based plans before denying the coverage.
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