You can only buy health insurance during the designated Open Enrollment period. For 2016 coverage, the Open Enrollment period was November 1, 2015 to January 31, 2016. The only way to buy coverage for 2016 is if you experience certain changes that qualify you for a special enrollment period (such as a divorce, a move, or the loss of insurance coverage through your job or Medicaid). Otherwise, you will not be able to purchase coverage until the 2017 Open Enrollment period begins on November 1, 2016.
If your income is between 100% and 400% of the federal poverty level, you may qualify for a tax credit subsidy that can help pay for a portion (or all) of your monthly health insurance premium. You may also qualify for an insurance plan that has cost-sharing reductions (reduced copays, deductibles, and out-of-pocket maximums). Your insurance broker can help you determine if you qualify.
The Marketplace (or “the Exchange”) is set up to offer an organized choice in health plans for individuals and families. Premium and cost-sharing subsidies are only available through the Marketplace (if you qualify based on income eligibility guidelines).
Health insurance premiums are fixed by law, so whether you buy from any broker or directly from the health insurance company, you’ll pay the same monthly premium for the same plan. Brokers and companies are not allowed to change the price of the health plans or offer any discounts, so you should be quoted the same price for the same plan by anyone you contact.
With so many options, choosing between different health insurance plans can sometimes be a daunting task. Having the right insurance broker to understand your needs and guide you through the different plan options is the best start to this process. Here are a few other things to consider:
1. Do you need basic or comprehensive coverage?
Basic coverage plans typically have a low monthly premium, but higher out-of-pocket expenses than comprehensive plans. If you intend only to use your insurance for preventive care, accidents, or serious illness, then a basic coverage plan may be the best option for you. If you will need to have lower costs for services like doctor appointments and prescription drugs, then a more comprehensive plan may be a better choice. Remember that regardless of your plan choice, the Affordable Care Act requires all plans to provide coverage for certain preventive care, and sets out-of-pocket maximums for what you will have to pay in a year.
2. Would you rather pay for services before you use them or when you use them?
Generally speaking, the lower the monthly premium that you pay, the higher you will have to pay per doctor’s appointment in co-payments, deductibles, and co-insurance. If you do not plan to use your insurance frequently, a higher-deductible plan that allows you to pay for services when you use them may be the best choice for you. If you do plan to use your insurance frequently, then it may make more sense to you to pay a slightly higher monthly premium so that you pay less when you go to the doctor.
3. Do you have certain doctors or hospitals that you want to use for your healthcare?
If you do, you will want to let your insurance broker know, so that he/she can help you make sure these providers are in-network with the insurance plan you are considering. It is important to keep in mind, however, that networks can change, so there is no guarantee that your doctor will always be in-network with your insurance plan.
4. Is it important that you can easily see specialists?
Some plans (typically HMO plans) require you to obtain a referral from your primary care physician (PCP) before you see a specialist, while some do not (most PPO plans). There are also plans that may not require a referral to see a specialist, but will make you pay a higher rate to see specialists without a referral (most POS plans).
5. What is the maximum you could afford to pay in case of a serious injury or illness?
The Affordable Care Act places a yearly maximum out-of-pocket expense for 2016 of $6850. However, there are plans that have lower out-of-pocket maximums, if you are willing to pay a higher monthly premium.
Some health insurance plans have co-insurance requirements, which is your share of a medical bill (claim). For each claim, you will be required to pay any co-pays or deductibles first, and then may be responsible for an additional percentage of the bill. For example, if your plan has a $10 primary care doctor co-pay and a 10% co-insurance, then a $100 medical bill would cost you $19.00 (your $10 co-pay, plus $9.00 in co-insurance).
A POS (Point of Service) plan is a combination of an HMO and a PPO. Though not required, you will choose a primary care physician (PCP) who can provide you with a referral before sending you to any specialists for other services (i.e. orthopedics, dermatology, cardiology). Services from out-of-network providers and specialists seen without a referral from your PCP are generally covered by your insurance company, but you will pay a slightly higher out-of-pocket cost than if you used an in-network provider or obtained a referral first.
PPO plans typically have larger networks of providers, but you may have higher out-of-pocket expenses than with an HMO plan. You will not be required to choose a primary care physician (PCP), and usually do not need a referral before seeing any specialists for other services (i.e. orthopedics, dermatology, cardiology).
HMO plans generally have smaller networks of providers, but typically offer lower out-of-pocket expenses for you. You will be required to choose a primary care physician (PCP), who will be the “gatekeeper” of your healthcare needs. You will need to see your PCP first for any health concerns, and he/she will provide you with a referral before sending you to any specialists for other services (i.e. orthopedics, dermatology, cardiology). Services from out-of-network providers and specialists seen without a referral from your PCP are not typically covered by your insurance company (except in emergencies).
In-network providers are contracted with the insurance company to provide services for pre-negotiated rates, while out-of-network providers are not contracted with the insurance company. Generally, if you use an in-network provider, your out-of-pocket cost will be significantly lower than using an out-of-network provider.
If you are not a U.S. citizen, a U.S. national, or a legal resident in the U.S., you are not eligible to buy a plan on the health insurance Marketplace with subsidy or cost-sharing. However, insurance plans outside of the Marketplace are not allowed to turn down your application based on immigration status.
Your application is processed the fastest and with the least complications when you submit an electronic payment with your application. Otherwise, the insurance company will send you a bill in the mail that you will need to pay before your coverage becomes active. For your ongoing monthly payments, many insurance companies offer auto-pay, electronic, or paper billing options. It’s important to pay your premium on time every month to make sure your coverage is not cancelled.
The date your insurance coverage starts depends on several factors. Generally speaking, applying between the 1st and 15th of the current month means your start date is the 1st of the next month. Applying after the 15th of the current month will put your start date the 1st of the month after the next. To make the process go faster, it’s best to make your first monthly premium payment as soon as possible.
You can only change your health insurance coverage during Open Enrollment, unless you qualify for a special enrollment period (see above). This is why it is important to work with an insurance broker that can help you select the right plan for your needs.
A deductible is a specific dollar amount that you will need to pay each calendar year before your insurance plan will start making payments for services. Not all insurance plans have deductibles, and the amount can vary. For 2016, the maximum deductible allowed by the Affordable Care Act is $6,850. Plans with higher deductibles typically have lower monthly premiums, but you will have higher out-of-pocket expenses each time you go to the doctor until you meet your deductible.
Also know as a “co-pay,” a co-payment is the amount that your insurance plan requires you to pay for a specific medical supply or service. Services that typically have co-pays include doctor and specialist appointments, and prescription drugs.
Some high-deductible health insurance plans allow you to set up and use a Health Savings Account (HSA). An HSA is a savings account that you make contributions to with pre-tax dollars, then use the funds in the account to pay for qualifying medical expenses. Unused funds can remain in the account and accrue interest year-to-year, tax-free. Annual contributions do have limits, and must be made by April 15th (the federal income tax filing deadline). For 2016, the limit is $3,350 for individuals and $6,750 for families.
Although these types of plans used to be very popular, they are no longer legally compliant with the Affordable Care Act (ACA). They usually have pre-existing condition clauses, do not have out-of-pocket maximums you pay, and have scheduled benefits (limits on what they will pay for services). Be wary of insurance brokers offering to sell you these types of plans. The lower monthly premium you will pay is often attractive, but having an indemnity plan does not provide you with the legal requirements for carrying a health insurance policy, and you could end up with hundreds of thousands of dollars in medical bills in the event of an emergency or surgery.
Most plans do require medical testing and charge premiums based on the level of risk they assign to you based on the testing. However even if you are not in top health or have a serious health condition, there are still some options available with guaranteed issue plans, although this comes at the cost of a higher monthly premium and a lower death benefit.
Buying a term life or a combination of term and permanent insurance may help you pay a lower premium. Buying a policy early in life is also a good way to ensure a lower premium. The older you are, the higher the premiums, and the more risk you have of developing a health condition that could increase your premium even more, or disqualify you from getting coverage at all.
Premium rates are typically based on factors such as age, gender, height, weight, health status (including whether or not you use tobacco), and if you participate in high-risk activities or occupations.
Permanent policies are typically the best option if you are looking for life-long protection, or an option to accumulate a tax-deferred cash value. A portion of the premium of a permanent policy is used to build up a cash value. The cash value can be used in several different ways, including allowing you to take out a loan against the cash value, or paying your premium after your policy is fully paid up. There are four kinds of permanent policies:
If you already have a policy, it will usually have a lower premium rate than a new policy you would buy. If you’re buying a permanent policy, the cash value will also be smaller for several years. Keeping all these factors in mind, it might be worth considering a new policy if you have any significant changes in your life circumstances, such as if you:
Are recently married or divorced
Have or adopt a child (or became a grandparent)
Have children or grandchildren who are about to enter college
Provide care or financial help to a child or elderly parent
Receive an inheritance
Retire (or your spouse retires)
Start a business
Change or lose your job or salary
“Fully paid up” means that you have paid enough premiums to cover the cost of the policy for the rest of your life, and the company will use the cash value to pay your premiums until you die.
Most policies have a 31-day grace period wherein you can pay the premium with no penalty or interest. If you have a term policy and do not make the payment within this grace period, the insurance company will usually terminate the policy. If you have a permanent policy, you can authorize the insurance company to draw your premium from your policy’s cash value.
Most policies have a contestability period of two years after you buy the policy. During this time, if the insurance company finds that they issued the policy under misrepresentation or withholding of information by you, they can declare your policy void.
Some term policies have a return of a premium feature that allows for a refund of all or some of the premiums you paid through the term of the insurance if no death benefit was paid. The premiums for policies with this feature tend to be higher, and you must be careful not to miss any payments throughout the term in order to take advantage of this feature
Some policies have a provision that allows you to collect a significant portion of the death benefit while you are still alive should you become terminally ill. The money can be used at your discretion to pay for medical expenses or even to do specific things with your family and friends while you still can. The amount you take out early will be subtracted from the death benefit payment along with interest.
Term insurance plans cover you for a term of one or more years, and it pays a death benefit only if you die in that term. However, even if you don’t die within the term, you have not wasted your money any more than when you buy car insurance but never have an accident. You have bought yourself peace of mind that your beneficiaries will receive the death benefit if you should die within the term. Term policies typically offer the lowest monthly premium and are usually the best option if you have a limited budget or a temporary need. You can typically renew term policies for one or more terms even if your health has changed, however each time you do so, the premium may be higher. There are four kinds of term policies:
1. In level term policies, the amount of the death benefit will remain the same for the entire term. Depending on the policy, your premiums may be level, or may increase over the term.
2. Decreasing term policies have a death benefit that decreases over the term. Your premium will typically remain the same throughout the term. People who purchase decreasing term policies usually have financial obligations that decrease over time (such as a mortgage payments or loans).
3. Annual renewable term policies have a death benefit that remains the same throughout the term, but a premium that increases.
4. Convertible term policies allow you to convert the policy into a permanent policy, typically without a medical exam or further underwriting. Generally this does increase your premium payment and must be done before you reach age 65.
To determine how much life insurance you need, it’s best to look at your surviving family’s immediate, ongoing, and future financial obligations, and compare that with your financial resources. Below are examples of each type of need:
Immediate: funeral costs, medical bills, taxes.
Ongoing: mortgage payments, utilities, food.
Future: college tuition, retirement funds.
Financial resources can include your partner’s income, savings, income-producing assets, and investments. Considering all these obligations and resources, the difference between the two is how much life insurance you need.