If you are self-employed, you have many freedoms the freedom to make your own schedule, the freedom to select whom you want to work with, the freedom to work wherever you want. You also have the freedom to pick your own health insurance plan. While it might feel like a burden to review and compare plans, the freedom of choice is very powerful if you know how to shop for the best health insurance coverage for you and your family.
Your health insurance plan is billed on a monthly basis. You do not prepay six or 12 months in advance like you do with your auto insurance. Many times the monthly cost of your insurance plan will be referred to as “monthly premium.” The word “premium” just refers to the amount you are being charged for your insurance coverage. Depending on your state of residence and the insurance company, you might be able to place your monthly health insurance expense on a credit card instead of having the expense removed from your checking account each month. The monthly cost of health insurance is based on many variables, in particular, the insurance plan deductible. It might be tempting to select the cheapest coverage to save money, but that doesn’t mean you are matching yourself up with the best health insurance plan for your medical lifestyle.
Understand How Deductibles Work
Sixty-four percent of health insurance plans come with a medical deductible, and 36% come with both a medical deductible and a prescription drug deductible. The lower the deductible, the higher the monthly cost of the health insurance plan. The higher the deductible, the more affordable the insurance plan becomes. It’s easy to be swayed by the cheaper price, but think about how much health care your family uses before selecting on price alone.
If you or your family see the doctor several times a year for things that are not considered preventive care, you will most likely have to pay all of those expenses out of your own pocket if you choose a high deductible health plan. If several family members take prescription drugs, consider a health plan with an added prescription drug deductible. Individuals with chronic medical conditions should especially weigh the benefits of a lower medical deductible or a plan with both medical and drug deductibles. It can be less expensive overall to pay more on a monthly basis for the cost of the plan, and payout far less towards a medical or prescription drug deductible.
Coinsurance Comes After The Deductible
Once you hit your deductible you might breathe a sigh of relief. Now the health insurance company will pay the rest of the bills, right? Wrong. After you meet your deductible, you typically have to pay a percentage of any additional medical bills that come in for the remaining term of your insurance policy (usually one calendar year). “Coinsurance” is many times broken out as 80/20 or 70/30 on your insurance plan details. The insurance company will pay the larger amount, either 80% or 70% of a medical bill, but then you are responsible for paying 20% or 30% of the remaining bill. Again, this only applies after you have met your health insurance deductible.
Know Your Out-of-Pocket Maximum
If you believe you are going to have an expensive health care year (having a baby, major surgery or receiving treatment for a chronic illness), look at a plan’s out-of-pocket maximum when you are comparing health insurance plans. If you see only in-network doctors or visit in-network medical facilities, this is the maximum you will have to pay for in-network medical care during the term of your health insurance policy (typically one calendar year). Keep that dollar figure in mind when considering how much you could ultimately be responsible for.
See if You Qualify For Cost Assistance
Families with a household income between 100%-400% may be eligible for government assistance in the form of a tax credit. Under the Affordable Care Act, individuals and families who purchase their own health insurance can receive cost assistance, which reduces the health insurance monthly premium. Check to see if your household qualifies for a subsidy.
Even if you are eligible for a subsidy on your health insurance, the overall cost of health care for the year might still be beyond your budget. But you might qualify for additional “cost sharing reductions.” If your total household income is between 100%-250% of the federal poverty level, cost sharing reductions are available on Silver tiered health plans (and Silver plans only). With cost sharing assistance, you can enroll in a Silver plan with a lower deductible, lower co-payments and have a lower out-of-pocket maximum.
Picking a Plan On-Exchange vs. Off-Exchange
If your household income is above the 400% federal poverty level, and you do not qualify for a government tax subsidy to ease the monthly cost of your health insurance coverage, you still have several cost-saving options.
Health insurance plans on your state exchange or the federal marketplace are known as “on-exchange” plans. If you qualify for cost assistance on your health insurance due to your income, you can only receive a subsidy on the overall cost if you buy on-exchange plans. But if you do not qualify for a subsidy, you do not have to buy an on-exchange plan.
“Off-exchange” plans are widely available, and depending on your state, can cost less than an on-exchange plan and offer more benefits. One of the greatest benefits of an off-exchange plan is an expanded doctor and hospital network. Federal on-exchange plans offer narrower networks to help keep costs low, which can limit your care options. Off-exchange plans open up your choices for medical treatment, and can reduce your out-of-network exposure.
Picking a health insurance plan might take some time, but having a deeper understanding of how health plans are structured will ultimately free you from making costly mistakes in the future.