The Affordable Care Act: Love It or Hate It, Here's What You Need to Know
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Ah, the Affordable Care Act. It's been a controversial topic since its inception, but there's no denying that it has helped millions of Americans get access to affordable health insurance. So, love it or hate it, if you're in the market for health insurance, you may want to consider getting coverage on a marketplace plan. Here's what you need to know:
The Affordable Care Act (ACA), also known as ‘Obamacare,’ is a federal law that was signed into effect in 2010 by President Barack Obama. The goal of the law is to provide affordable health insurance coverage to as many people as possible. Under the ACA, insurance companies are required to offer coverage to people with pre-existing conditions and cannot charge them more than healthy people. The law also requires individuals to have ACA compliant health insurance or face a penalty, although this penalty was eliminated in 2019.
There are a lot of names for these plans that are used interchangeably by people in the business: The Marketplace, Obamacare, The [State] Exchange, Affordable Care Act plans, ACA Compliant Plans, HealthCare.gov. All of these are referring to plans that are regulated by the Affordable Care Act and I will call them “Marketplace Plans.”
Pros and Cons of Getting on a Marketplace Plan Let's start with the pros. One of the biggest advantages of getting coverage on a marketplace plan is that you may be eligible for subsidies to help pay for your premiums. These subsidies are tax credits based on your income, so if you earn less than a certain amount, you may qualify for significant savings. Since the Covid-19 pandemic, subsidies have been expanded to people who originally could not qualify for subsidies. Another pro is that all marketplace plans must cover essential health benefits, including preventive care, prescription drugs, and mental health services. And, most importantly, if you have a pre-existing condition, you can't be denied coverage or charged extra on premiums.
Now for the cons. The biggest downside of marketplace plans is that they can come with high deductibles and out-of-pocket costs. This means you may have to pay a lot of money out of pocket before your insurance kicks in. Additionally, not all doctors and hospitals may be in-network, which can limit your options for healthcare providers and plans do little to travel with you outside of the state. I often remind clients that, if they are traveling, they want to get either additional insurance to cover them or expect to pay a lot to get back to an in-network doctor or hospital after their situation is no longer labeled “emergency.”
How the Subsidies Work If you qualify for subsidies, they can be a real game-changer in terms of affordability. But how do they work? Basically, the amount of subsidy you receive is based on your income compared to the federal poverty level. If your income is between 100% and 400% of the poverty level, you may be eligible for a subsidy or tax credit that is paid toward your monthly premium. The lower your income, the more assistance you can get. You can use the subsidy to lower your monthly premium, or you can take it as a tax credit at the end of the year.
Avoiding Paying Back Subsidies One thing to keep in mind is that if your income changes throughout the year, you may have to pay back some or all of your subsidies when you file your taxes. To avoid this, it's important to update your income and other information on your marketplace application as soon as possible if there are any changes. Good health coverage advisors will tell you to overestimate your income or try to be as accurate as possible including all expected changes in your life. For instance, one of my clients sold her house and moved. The profit on her house is also taxed, so that became part of what they looked at when comparing her expected income to her actual income. Qualifying for subsidies can be a gamechanger in terms of monthly premium affordability, but it has caused a lot of people headaches when doing their taxes and finding they have to pay back some or all of what they were granted monthly.
Avoiding High Deductibles or Premiums As we mentioned earlier, marketplace plans can come with high deductibles and premiums. So, what can you do to avoid these costs? First, shop around and compare plans to find one that fits your budget and healthcare needs. Consider the cost of premiums, deductibles, and out-of-pocket expenses when making your decision. Using a health coverage advisor can improve your chances of getting the coverage you need and you then have someone to come to with questions later. Additionally, you may want to consider a high-deductible health plan with a health savings account (HSA), which can help you save money on taxes and build up a fund for future healthcare expenses.
Other Options A health coverage advisor, if they are a non-captive agent or broker, can also look at options both on and outside of the Marketplace and advise you on the best options available for you. Oftentimes, clients don’t realize that the “pre-existing condition” they have is not enough of a risk for a non-ACA insurance plan to take them or may think that they are completely healthy now that they have had all their pre-existing conditions fixed by surgery or under control by medication. It is free to consult with a health coverage advisor whether about getting a new plan, understanding the plan you are currently on, or just have questions about health coverage.
Getting coverage on a Marketplace Plan under the Affordable Care Act may be a good option for you if you're looking for health insurance and qualify for enough subsidies to make the options ‘affordable.’ While there are pros and cons to consider, the subsidies can make a big difference in affordability. Just be sure to update your information as needed to avoid paying back subsidies and shop around to find the plan that best fits your budget and healthcare needs. And if all else fails, just remember that laughter is the best medicine, even if it's not covered by insurance. But wouldn’t it be great if it was?