3 Easy Steps

  1. 1. Make your Selection
  2. 2. Compare Plans
  3. 3. Apply
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How to shop for health insurance: It’s not as easy as it sounds

April 18th, 2014

Health app

Credit: Jason Howie via Flickr under Creative Commons

Many Americans assume that when it comes to shopping for health insurance the process couldn’t be easier, especially with the implementation of the Affordable Care Act (ACA) earlier this year. However with the advent of the  ACA, also known as Obamacare, the already convoluted world of shopping for health insurance, just got a whole lot more complicated.


Preparing to buy health insurance

One of the major provision of the ACA was the establishment of health insurance exchanges at the both the state and federal level. These exchanges are online marketplaces where citizens and state residents can shop for government subsidized and approved health insurance policies for sale in their area.

Whether you’re shopping at your state’s exchange or the federal exchange has to do with whether your state chose to build their own exchange or let the federal government do it for them.

One of the big draws of the exchanges is that you can receive a federal health insurance subsidy when shopping there. What that means is that if your annual income is between 100 percent and 400 percent of that current year’s Federal Poverty Level (FPL) then you get a subsidy for you health insurance. As you might imagine that subsidy is bigger the closer you are to 100 percent FPL.

Step 1: Budget

First you want to make sure you know what your health insurance budget is. It’s extremely important to know how much money every month you can afford to spend on health insurance for your and your family.

At this stage you should also figure out how often you plan on seeing a doctor. The reason for this is that the health insurance exchange plans come in four different levels, Bronze, Silver, Gold, and Platinum. Each level of coverage comes with its own monthly premium, copay, and deductible amounts.

For example a Gold plan will be more expensive per month than a Bronze level plan. The difference is that the Gold plan will have a lower deductible and smaller copays than a Bronze plan. Meaning if you’re at the doctor a lot then while you will pay more per month for a Gold plan, you’ll pay less per doctor visit, making it a value.

It’s important to note though that for the most part each level of coverage typically has the same network of doctors and hospitals. Meaning that a Bronze plan buyer and a Platinum plan buyer purchasing their plans from the same company will each be limited to the same in network providers.

Step 2: Watch your networks

One of the big criticisms of the ACA has been the legislation’s impact on the size and availability of health insurance networks. It is a fairly complex subject, but essentially the ACA puts enormous pressure on health insurance companies to keep costs down and prices low.

In response to that pressure insurance companies have drastically reduced the size of their provider networks, and lowered their doctor reimbursement rates to historic lows. Those two factors combined have made it so that the majority of exchange plans have much smaller provider networks.

So when you’re preparing to shop for health insurance it’s vitally important that you take the time to review the exact network size and offerings for each company selling plans in your area.  Often times it’s difficult to tell from the exchange website what the provider network looks like. When that’s the case you should call the exchange and speak with a representative there, or even get in touch with the health insurance company in question.

Step 3: Medicaid

Depending on which state you’re living in, you might qualify for the newly expanded Medicaid program under the ACA. Originally the ACA called for expanding Medicaid eligibility to any individuals with incomes up to 138 percent FPL.

However when the Supreme Court upheld the ACA it struck down the mandated Medicaid expansion provision. So states had the option to expand the program, but they were no longer required to do it. The result is that about half the states expanded Medicaid. Now depending on your location you may qualify for the program.

Step 4: Children’s health insurance

If you have a child and you are looking to purchase a health insurance exchange plan then your child may qualify for coverage through the Children’s Medicaid program known as Child Health Plus. In fact many states require that a child be enrolled in the program if their parents are getting a subsidy at the exchange.

Step 5: Determining your subsidy

As I mentioned earlier in the article if your annual income falls between 100 and 400 percent of the current year’s FPL then you receive a federal health insurance subsidy along with your exchange plan. However when you’re applying for health insurance for the following year during open enrollment, you are asked to estimate your income for the upcoming year. It is from that estimated income amount that the size of your subsidy is determined.

This is good on the one hand because you do not need to wait for a reimbursement, but it can be bad if you suddenly have an income change during the year. For example if you estimate one number and receive a large subsidy because of it, but then your income changes during the year you are liable to pay back the extra part of that subsidy that you received.

The best course of action is to only take about 75 percent of the offered subsidy upfront when purchasing an exchange plan. This will give you some flexibility for unexpected income changes during the year. It should be noted that the opposite is also true. If you start the year with no subsidy then have an income change resulting if your eligibility changing you can get the money back.

Step 7: On your own vs. with a broker

If shopping for health insurance on your own now seems like a daunting task, that’s because it is. But there are plenty of resources to help make your shopping experience go a bit smoother (like this blog).

You might also consider working with a health insurance broker. A broker knows all of your potential health insurance options inside and out. They can hold your hand and guide you through the buying process so that it takes hours instead of weeks.

A broker can also make specific health insurance recommendations to you based on the information you share. Whereas an exchange navigator can only answer your questions without giving recommendations about what plans they think will be best for you. Navigators are actually barred by law from doing this.

You can get all of this for free when working with a health insurance broker. Yes that’s right I said free. Brokers can no longer charge you a fee for working with them, and they get paid from the health insurance company when they find you a plan. Essentially you get expert help finding the health insurance plan that’s right for you, at no cost.


Open Enrollment starts in November

I know that’s a lot of chew on all at once. Well the good thing is that the next open enrollment period for the Affordable Care Act does not start until November 2014, specifically November 15, 2014 for health insurance coverage beginning in 2015. Meaning you have plenty of time to digest the information here.