Often the process of buying health insurance can be a confusing topic—especially for those of us who have never had to do it on our own. But with the recent economic challenges, that may have been just the case. Following our last articles exploring some of your most common temporary options including short-term health insurance and COBRA, we would today like to explore one of the many things you need to know when looking at health insurance on the marketplace.
Background: Buying Insurance on the Marketplace
Before buying, you need to understand a few basic terms and prepare to answer a few questions that will determine how much a plan costs you.
Basic Terms in Health Insurance Comparisons
But first, a refresher. The different plans affect the following topics. Something we introduced in our basics on short-term insurance, you will come across the following terms when considering plans:
- Premium: The monthly fees you pay for coverage. You may qualify for a subsidy to lower your premium.
- Deductible: The threshold of out of pocket costs before your plan begins sharing costs. For example, a $5,000 deductible means that you pay out of pocket for the first $5,000 of coverage.
- Coinsurance: A cost you may not be used to, coinsurance represents a percentage of costs you pay after you meet your deductible.
- Copay: Generally payable at time of visit, copays differ based on the service you need.
- Out of Pocket Costs/Uncovered Costs: Short term plans have more flexibility in the services covered. You may pay out of pocket services that aren’t covered.
Your total out of pocket will represent some kind of combination of these costs.
Note: Each of the following plans deal only with the cost sharing that exists and have nothing to do with quality of care or essential health benefits.
Determining Factors for Premiums
Before selecting between the different metals, you will be presented with the following questions, each of which determine how much your premium may be:
- Your Age: The primary driver of premium based on the cost of services and risk each age group presents.
- Zip Code: While the 10 essential health benefits are guaranteed nationwide, different states and locations present different risk pools. For example, Illinois requires more services than Montana, and also a higher health cost.
- Number of People under the Plan: Individual coverage will vary in the premiums and deductibles from family coverage.
- Smoker/Non-Smoker: Some states may apply a surcharge for smokers.
- Insurance Company: You will be presented with a variety of options when you fill out a quote.
- Advance Premium Tax Credits: For those falling between 100% and 400% of the Federal Poverty Level, you will also qualify for Advance Premium Tax Credits—the subsidy that affects your premium.
Bronze, Silver, Gold, or Platinum?
Known as the “Metal” categories, these represent the different cost structures you will come across when considering health insurance plans. Depending on your health and expected use of a plan, the right category can go a long way in saving you money.
Bronze: Lowest Premium, High Deductible and Percentage Covered
For the relatively healthy or unlikely to use medical services, bronze plans offer the lowest premium of any “metal” plan. If you want a low-cost way to protect yourself from worst-case medical scenarios, like serious sickness or injury, these plans will deliver what you need. However, with a low premium, it also means that you’ll have to pay for most routine care yourself.
In this category, it’s estimated that you will pay 40% of all costs out of pocket and see deductibles near the maximum out of pocket amount. In limited circumstances, these are useful, especially for low-risk individuals who are not eligible for cost-sharing reductions.
Silver: The Moderate Plan
Built on a 70/30 split, in which your insurer will generally pay 70 percent of costs, the silver plan offers slightly lower deductibles and slightly higher premiums. As noted, these are the minimum plans for those eligible for cost sharing reduction subsidy—provided to those who fall between 100% and 250% of the Federal Poverty Level.
Gold: High Premiums, Low Deductibles
For those willing to pay a bit more each month, the gold plan delivers an 80/20 split—the insurer will cover 80 percent, leaving you with the other 20 percent. As noted, these have much higher premiums, but pay for themselves if you expect to use services often.
Platinum: Lowest Deductibles, Highest Premiums
For those expecting to hit their deductible early in the year, platinum plans are designed to offer the lowest deductibles and highest premiums. Often, the plan will pay for itself very quickly, have incredibly low deductibles, and cover a lot more. These feature a 90/10 split.
What about Catastrophic Plans?
Though technically not a “metal” category, catastrophic coverage is designed to provide plans with low premiums for individuals with low risk. As the name implies, these are meant to protect policyholders in the event of the worst-case scenario.
Catastrophic plans cover the same essential health benefits as other Marketplace plans, will provide preventive services t no cost, and at least three primary care visits before you’ve met your deductible.
However, with the extremely low premiums, these do feature high deductibles, $8,150 in 2020.
The only plan with eligibility requirements, catastrophic plans are only eligible to people under the age of 30 or people with a hardship or affordability exemption.
Which One is Right for You?
When choosing a plan, you have many options available. Though all plans on the marketplace do cover the ten essential health benefits, your choice should balance your expected risk tolerance and monthly cost tolerance. For more advice on how to select a plan, Insurance Broker Hub is here to help.
Our free service gives you access to an independent network of national brokers who have the experience and expertise to design a plan around your needs and budget. Ready to get started? Simply request a health insurance quote here.