Open Enrollment: Where to buy the best healthcare plan

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Open Enrollment: Where to buy the best healthcare plan

Health insurance today in the United States is a far different creature than it was even a couple of years ago. It's bigger, more varied, and more complicated. There are more choices for the consumer than ever, but also a lot more ways to get frustrated or confused, which means more ways to end up with the wrong coverage.

With luck, you're one of those who can stick with your employer-sponsored health insurance for another year (and hopefully that employer-sponsored plan isn't changing so dramatically that you find yourself wandering the same frontier as the rest of us).

If employer-sponsored coverage is out of the question, then odds are you can find what you need through the official Obamacare health insurance exchange. And if not there? Don't give up just yet, because there are still more options you might not have considered, and there's still a chance you'll be able to find the best healthcare plan for your particular needs before the year ends.

Option 1: Employer-sponsored group health insurance

For the majority of working Americans, this will be your first and last stop on the healthcare coverage express. If you have this option of getting health insurance through your employer, there are some things you should keep in mind.

  1. The plans must follow same rules as on the marketplace.
  2. Your employer doesn't have to extend coverage to your spouse, so your spouse may need to look at these other options even if you don't.
  3. You won't qualify for a premium tax credit--aka the health insurance subsidy that Obamacare provides--the way you might if you purchased a plan on your own through your state marketplace.

The best thing about health insurance through your job is that your employer often pays part of your premium. That's a pretty big argument in favor of keeping it over shopping for a replacement. Still, there's no guarantee the plan your employer offers is the best one. Even if your employer offers health insurance, you may still have to do some extra financial planning on your end to make things work.

This is especially the case when it comes to a relatively new health insurance product called a high-deductible plan. This is often described as a way to save money on health insurance, but in the real world a lot of people find it too expensive. Make sure you understand its ramifications should you buy it.

High-deductible health insurance plan making you sick? Meet its antidote, the Health Savings Account (HSA)

If you look online for information about high-deductible health insurance, you'll often find descriptions that suggest this is a not-half-bad way to secure some affordable insurance. But it's not-half-good, either. For too many, a high-deductible plan is the health insurance you can afford to buy, but not afford to use.

The problem is right there in the name: the monthly premiums are low, but you'll have to pay $1,300 or more first before the plan will kick in and start to offset your medical expenses. There are some exceptions for certain preventative procedures like mammograms and colonoscopies, and some plans may offer special pricing on prescription drugs regardless of whether you've met your deductible. But for the majority of other medical expenses you'll be stuck on our own for a while.

Fortunately there's a counterpart to a high-deductible plan, and it's actually a pretty good idea. It's called a Health Savings Account (HSA), it's tax-protected, and it essentially serves as an emergency fund that you can use to plan ahead for that that high deductible. And although your employer may contribute to your HSA, it's actually owned by you and doesn't require an employer's involvement or consent at all.

You can find high-deductible plans on the individual insurance marketplaces as well. So whether you get it from your job or buy it on your own, if your deductible ends up being at least $1,300, you can—and should—open an HSA.

It doesn't change the fact that you'll be paying for a lot of your medical expenses up front each year, but it will at least help you keep your budget and bank account healthy while you keep yourself healthy as well.

Option 2: Individual health insurance plans through your state marketplace

If you can't get or don't want insurance through your employer, it's time to start looking at individual plans on your own. And guess where the best place to start is? That's right, your state marketplace.

If you're going to buy your health insurance plan on your own, there are some clear benefits from doing it through your state's health insurance marketplace:

  1. The plan will be guaranteed to meet the minimum coverage requirements set forth by the ACA. This includes things like prescription drug coverage and cancer screenings, and it means no matter which plan you end up buying, you'll know that at least the basics are covered.
  2. You'll be able to offset your premium with a premium tax credit (assuming you qualify for the subsidy—there are certain eligibility requirements).
  3. You may also qualify for "cost-sharing reductions," which will reduce your out-of-pocket costs even before the deductible is met.

For those last two reasons alone, it makes sense for most people to at least start your health insurance shopping adventure on your state marketplace. You can quickly guesstimate your premium tax credit using the free Kaiser Family Foundation subsidy calculator before you decide whether to stop and shop. And if you do, here's our guide on how to find the right plan.

Option 3: Individual health insurance plans outside of your state marketplace

But what if you make too much money to be eligible for the tax credit (and by extension any cost-sharing reductions)? Then the biggest reason to stick to the state marketplace goes away.

Even if you qualify for the tax credit, there are a few other reasons to shop for a plan outside the ACA marketplace:

  • You might be able to find a cheaper plan that doesn't meet the ACA-mandated coverage requirements, but that offers enough coverage to satisfy your own tolerance for risk.
  • You have lost your coverage but it's not the official end-of-year open enrollment period yet, and your circumstances don't qualify for a special enrollment period.
  • You can't find a plan on the ACA marketplace that you like.

The ACA ensures that every state has access to an official marketplace of ACA-compliant plans, but it doesn't forbid insurance companies from continuing to develop and sell other health insurance plans directly or through other non-ACA marketplaces.

For example, you can go to a non-ACA marketplace like http://www.healthcare.com/ and within a few seconds find a list of plans available in your state. They won't necessarily be cheaper, or ACA compliant, and they often won't be eligible for the premium tax credit--but you'll find a wider range of options and prices.

So what are the benefits of shopping on one of these private marketplace s?

  1. You'll probably have a less frustrating shopping experience. You remember all the problems with healthcare.gov and many of the state-run ACA marketplaces when they first launched, right? Although the experience has gotten much better in the past couple of years, shopping on an official marketplace can still be a test of patience. My test searches on Healthcare.com were fast and error-free, and their comparison tool made it easy to perform a line-by-line comparison of three plans I considered buying.Healthcare.com's tool to estimate a plan's value is helpful.

Healthcare.com's tool to estimate a plan's value is helpful.

  1. You'll have access to a wider variety of plans. While this doesn't automatically mean your choices will be any better, in theory this should increase the odds that you'll find a plan that may be a better match for your budget.

As for the drawbacks:

  1. You'll have to pay a tax penalty if you end up buying a plan that doesn't meet the ACA's minimum coverage requirements. Keep this in mind when comparison shopping if your main reason to shop outside of the ACA exchange is to save money.
  2. It will be up to you to make sure you're getting the coverage you really need. One reason why the ACA established minimum essential coverage requirements was to help cut down on confusion in the marketplace. If every plan has to cover the same basic things, you can focus on comparing other features and not have to worry about being tricked by fine print. But once you're off the ACA exchange, you're on your own, so read everything twice.

Here's a quick summary of the differences between the two marketplaces:

A comparison of health insurance plans available on the official ACA exchange and off

The three options above should cover most normal situations. But what if your situation is an exception? For example, you're a college student who isn't covered by your parents' out-of-state policy. Or you're about to move to a new job and just need temporary coverage for a couple of months. Or you've suffered a major financial setback and needed to give up your Obamacare health insurance, and now you're looking for an affordable replacement until your budget is in better shape.

A lot of people assume that health insurance coverage starts and stops with employer-sponsored plans and Obamacare, but in fact there are several options available that you can consider.

Additional strategies

Short-term health insurance

If you do find that you're going to be without health insurance coverage for several months, a short-term health insurance policy can function as a stop-gap until your next job starts or open enrollment begins. Short-term policies tend to be a lot cheaper than regular insurance, but on the other hand they're more limited in what they cover, and you have to be in good health to buy one.

If you're willing to make these trade-offs as well as some others, it's possible you can actually replace your standard health insurance with short-term insurance, although you need to make sure you understand what you're getting into.

The tradeoffs:

  1. Short-term plans last from a few months to a year, and then you will have to reapply. If you used "too much" of your plan in the previous months, you could be turned down for renewal.
  2. Deductibles can be high (although not necessarily any higher than the plans you'll find on the AXA exchange).
  3. There's likely to be little or no prescription drug coverage. Instead, you could be offered a drug discount card.
  4. The plan most likely won't even try to meet the "minimum essential coverage" guidelines of the ACA. This means you need to make doubly sure that the plan will actually cover the procedures you think could be likely in the coming months.
  5. And as mentioned, you'll need to be fairly healthy and under 65 to qualify for most short-term plans.

On the other hand, if you can stomach the tradeoffs then you could end up with a plan that costs a lot less than a Silver or even a Bronze plan on the official exchange, albeit one that offers a much narrower scope of coverage.

To figure out whether you can make a short-term plan work for you, take the following steps. Yes, it's a little bit of work, but without doing this you're just as likely to waste money as to save it.

Is a short-term health insurance plan right for you? Here's how to tell

Step 1: Figure out whether you would qualify for a premium tax credit on your state marketplace. Use the Kaiser Family Foundation subsidy calculator to find this number. (It hasn't been updated for 2016 yet, but the 2015 data should be good enough for your this purpose.)

Step 2: Figure out the estimated tax penalty you'll have to pay if you don't buy insurance that meets the minimum essential coverage rules.

Step 3: Shop on AgileHealthInsurance.com for a short-term plan that you're satisfied with.

Step 4: Now go to the official exchange and find a Silver or Bronze plan that you're okay with. If you found out in Step 1 that you qualified for a subsidy, be sure to take that into account when looking at prices.

Step 5: Now comes the fun part. The estimated tax penalty only kicks in if you go without ACA-approved insurance for more than 2 months. If you go for 3 months or more, you'll have to pay one-twelfth of your tax penalty for every month you didn't have proper coverage. For example, if you keep your short-term plan for only 2 months and then give it up, you'll avoid the tax penalty. But if you keep the plan for a 6 month period, then you'll have to pay half of your annual tax penalty to cover those 6 months. (But keep in mind that even though nobody likes to pay a tax penalty, the size of the penalty may still be small enough to make this approach viable.)

Factoring in the tax penalty when estimated total cost of short-term health insurance

Armed with these slightly-more-realistic dollar amounts for ACA-approved insurance and the short-term plan, you can start to compare what each plan offers. The short-term plan will always offer less coverage and fewer benefits, but if you find you're okay with what's missing from the plan, then you might decide it's worth taking the tax penalty and sticking with short-term.

School health insurance

If you're in college and find that you're no longer covered under a parent's plan (which is often the case if you end up going to school in another state), check whether your school offers some sort of basic health insurance.

Limited benefit plan

As we noted earlier this year, a limited benefit plan is sort of like a coupon booklet for healthcare. It's better than nothing, but if you're trying to decide between a short-term plan and a limited-benefit plan, stick to short-term.

Clinics, wellness apps, and telemedicine services

While these don't replace the need for a solid health insurance plan, they can help save you money and misery if you find yourself sick and without any health insurance. The most promising new services charge an affordable monthly fee for 24-hour access to health professionals who can provide basic diagnoses and handle routine prescription needs.

Catastrophic

Catastrophic insurance is designed to protect you from the huge, financially ruinous medical expenses that sometimes come along. But it isn't going to save you money if you happen to get moderately sick or injured during the coverage period, because the deductible will be so high. If you're young and healthy and are fairly confident you won't need to use it—and if you can rely on things like the clinics and telemedicine services mentioned above to take care of any minor health issues that come up—you might be able to make it work.

Long-term disability insurance

Finally, whether you've obtained health insurance or not, you should seriously consider long-term disability insurance if you're under 40 and don't already have a history of serious health issues. While health insurance will help defray the immediate cost of treating an illness or injury, long-term disability insurance will replace your income if a medical situation prevents you from being able to earn a living.

Photo: JonoTakesPhotos