If you’re looking for affordable health insurance, there are plenty of options to choose from. But finding the right plan requires a little understanding of how health plans work.
Premiums, deductibles, co-pays and out-of-pocket maximums all play a role in what you pay each month for coverage. Using these key terms can help you make smarter decisions when shopping for a plan.
Premiums
Premiums are the amount of money you pay each month for health insurance. They can vary greatly depending on the type of plan you choose, deductibles, your location and age.
As a share of your income, middle-income individuals and families have higher premium burdens than do people at lower income levels. But the ACA helps these individuals and families afford coverage by extending eligibility for premium tax credits.
Deductibles
A deductible is a fixed amount you owe for covered health care before your insurance plan starts paying. These can vary by plan, so check your policy details before selecting a plan.
The lower the deductible, the less money you’ll have to pay out-of-pocket in a given year. However, you might also save money if you choose a plan with a higher deductible but a lower premium.
Co-pays
Co-pays are fixed amounts you pay for certain health care services. They typically apply to doctor visits, emergency room care, and prescription medications.
In addition, most insurance plans offer coinsurance, a percentage of the cost of your health care that you share with your insurance company. For example, if you have 20% coinsurance, you’ll pay $20 out of pocket for a doctor visit, and your plan will cover the remaining $85.
Out-of-pocket maximums
While health insurance protects you against high medical bills, it doesn’t mean that you won’t be responsible for some costs. These are called out-of-pocket expenses and include deductibles, coinsurance, and copays.
Regardless of the type of plan you choose, you should never be subject to a higher out-of-pocket maximum than your deductible. That’s because higher deductibles make it less likely that you’ll ever reach the out-of-pocket maximum.
Subsidies
Subsidies, established by the Affordable Care Act (ACA), can help lower your out-of-pocket costs for health insurance. They include premium tax credits and cost-sharing reductions.
Depending on your income level, you could qualify for one or more of these federal financial aid programs.
These subsidies are sent directly to the insurance company and offset your monthly premium payments. But you have to estimate your income as accurately as possible when you apply for a subsidy.
Medicaid
Medicaid is a public health program that provides low-cost coverage to millions of Americans. It’s run by states that get federal funding, but eligibility requirements vary from state to state.
In general, people can qualify for Medicaid if their income is too high to afford private insurance. This includes children under age 19, parents, seniors, people with disabilities and the poor.
Silver-tier plans
One of 4 tiers in the Health Insurance Marketplace(r), Silver plans tend to fall between Gold and Bronze plans in both monthly premiums and medical benefits. They’re a good option for people who want moderate coverage and who are eligible for cost-sharing reductions (CSR) subsidies.
Before choosing a plan, be sure to check your eligibility for premium tax credits and cost-sharing reductions. This will help you choose a plan that works for you financially.
Employer-sponsored coverage
Employer-sponsored coverage is a type of health insurance plan that employers offer to their employees and their dependents. These plans typically provide more comprehensive coverage than individual plans.
Employers must report the cost of their coverage on employee W-2 forms, which help employees understand how much their coverage costs. It also helps them compare prices among different options.
State health insurance marketplaces
State health insurance marketplaces (SBM) are centralized portals where you can shop and compare health plans from multiple insurers. Some states have their own state-based exchanges and others use federally operated platforms.
State health insurance marketplaces are a critical part of the ACA, which aims to expand access to coverage. They also have significant potential for reducing premiums and ensuring coverage for all.
