We live in a world of uncertainty when it comes to the future of health insurance. Will the Affordable Care Act (ACA) get repealed? Will Medicaid shrink? Will more people become uninsured? The health insurance industry is waiting for leaders in Washington to indicate what is next on the horizon. One truth is the market is unbalanced because health insurance companies are pulling out of the federal and state exchanges, leaving many states and counties with sometimes just one option or zero options for coverage on the exchange. Until a balance is put into place, health insurance could get more expensive and be harder to obtain.
With deductibles increasing to keep the monthly cost of insurance lower, many families are boosting their financial protection with supplemental health insurance. Supplemental insurance typically covers accidents, illness or both, removing the possible strain on a family budget should an unexpected diagnosis or event occur. Supplemental health insurance pays cash, giving individuals and families the money they need to pay the bills (usually the medical expenses they are responsible for before they meet their health insurance deductible). However, there is no limit to how supplemental health insurance benefits can be used. The money can help pay the mortgage or daycare, perhaps a car payment – whatever the need is.
So what is happening within the individual health insurance market that is making supplemental insurance more and more valuable?
Shrinking ACA Marketplace
Insurance companies aren’t required to sell health insurance plans on the ACA marketplace. In fact, those that chose to sell insurance on the ACA marketplace filed just a few plans from their portfolio when Obamacare was originally rolled out and limited their doctor networks to keep prices affordable. Yet, even with the limitations, every state had an average of five insurance companies registered to sell on the ACA marketplace when it was rolled out in 2014.
As a reminder, the goal of Obamacare was to have people of every age enroll in plans for the same price, no matter if they were very sick and needed extensive treatment or if they were healthy and never used their insurance beyond preventive services.
Perhaps good in theory, the scenario didn’t work out. Healthy people stayed away from the ACA marketplace and insurance companies were instead flooded with applications from sick people who needed medical care. This caused the cost of insurance to go up, sometimes more than 50 percent in a year, because insurance companies had to pay for the care of their sick customers. However, providing expensive medical care versus income from monthly premiums didn’t balance out, and insurance companies began leaving the Obamacare exchanges for the more stable private market that doesn’t supply tax subsidies for insurance. Today 40 percent of counties in America only have one choice when it comes to which health insurance carrier they can buy from. On top of limited choices, analysts are expecting a 28 to 40 percent increase to monthly premiums in 2018.
In addition, approximately 45 counties could be without a health insurance option on the ACA marketplace for the 2017-2018 open enrollment period. While not yet finalized, residents in states like Missouri, Ohio and Washington state could be forced to the private marketplace where no tax subsidy plans are available.
Medicaid Funding Could Decline
After House Republicans released the first version of the new health care bill on May 4, Senate Republicans released their own version of the the health care bill in early July, called the Better Care Reconciliation Act (BCRA). Like the House bill, the Senate bill would strike many provisions of the Affordable Care Act. The bill’s provisions for reducing funding for Medicaid expansion, and changing the federal government’s funding structure for Medicaid, have many Medicaid recipients worried. If the BCRA eventually becomes law, many low-income, disabled and elderly Americans could find themselves no longer eligible for Medicaid. And the numbers are staggering.
Americans Who Could Lose Health Care Coverage Under the BCRA
- More than 1.6 million adults on Medicaid
- More than 4.8 million children on Medicaid
- About 846,000 disabled Medicaid recipients
- 8.3 million people that became eligible for Medicaid under the Affordable Care Act
- 7 million in the individual market who purchase their own health insurance
TOTAL: 22 million people could lose their health insurance coverage, of which, over 1 million are elderly.
Alternative Health Insurance and Supplemental Combo Plans
If 22 million people are suddenly without insurance due to cuts to Medicaid and the individual marketplace, what will they do for health coverage?
Health insurance options will depend on an individual’s monthly budget, health status and desire for a benefit-rich plan or lower cost catastrophic coverage. Americans in the individual marketplace who lose coverage will most likely do so because 1) the tax subsidy that keeps the monthly cost of their insurance low will go away and the insurance plan will become too expensive to afford, or 2) the price of insurance will increase so dramatically it will become too cost prohibitive to keep. Individuals who might drop or lose their coverage but still desire low cost insurance should look at three alternative options:
- Short term health insurance
- Limited medical insurance
- Faith-based health sharing ministries
Short Term Health Insurance
Short term health insurance can be purchased as a temporary replacement plan for just a few months or as an alternative solution for nearly one year. It is similar to major medical health insurance with deductibles, coinsurance and depending on how rich the plan is, doctor copays for office visits and prescription drug coverage. Short term medical is not guaranteed like Obamacare – there are medical eligibility questions. But for those looking for comfort by having health insurance to cover a catastrophic incident, short term health insurance is a option to look into.
Limited Benefit Insurance
Contrary to how the title might sound, limited medical insurance, also known as fixed indemnity insurance, provides “fixed” cash benefits for care. Unlike major medical or short term insurance, limited medical does not have deductibles or copays. Instead, limited medical insurance pays a flat “fixed” price for specific office visits, treatment or care. There are many different types of limited medical benefit plans to choose from, ranging from basic coverage to top of the line protection. Like short term insurance, limited medical plans require proof of medical eligibility.
Faith-Based Health Sharing Plans
Faith-based health sharing programs are a third option for individuals looking for low cost health care coverage. While not insurance, faith-based plans pay cash for medical treatment after a minimum threshold is met, which is typically lower than a deductible on a health insurance plan. Here’s how it works:
When you enroll in a faith-based plan, you agree to pay a portion of your medical expenses up front, just like an insurance deductible. This can range from $10,000 to $1,000. Then, each month an individual or family “shares” a specific dollar amount for medical bills and administration of the faith community – similar to paying a monthly insurance premium. Whenever someone in the community has meet their annual portion and has a qualifying medical bill, they request funds to pay for the bill. The money that has been paid into the community share fund then pays for the member’s medical bills.
Faith-based health sharing plans can be an affordable option for families, with monthly costs starting at around $250 for a family of four.
Best yet? Soon the worries of carrying a marketplace health insurance plan or being issued a tax penalty will be gone. Congress is working on eliminating the most unpopular element of the ACA law separately from the health care bill. This would remove the burden of being penalized for not having an ACA plan, and open up various types of alternative options to Americans.
Add Supplemental Insurance
Individuals who decide they want to skip major medical insurance and go the lower cost alternative insurance route have one more layer of protection they can add to their insurance portfolio – supplemental insurance. Starting at $1 a day individuals can receive extra cash benefits that cover unexpected accidents and illnesses – large dollar items that can severely dent life savings quickly. Cash received from supplemental insurance can be used for medical bills, household expenses, the mortgage, car payment and even child care.
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