Navigating the American Health Insurance system is a little tricky. Many countries have what is called a single payer healthcare system covered by taxpayer dollars. Those taxes cover the costs of essential healthcare for all residents and are paid out by the government.
That’s not the case in the United States. Here, insurance is typically covered by an employer, Medicare, Medicaid, or Veterans Affairs. Sometimes your insurance may be covered by your parent or spouse.
But for millions of Americans, none of these systems fit their situation. If you’re self-employed and over the age of 26, you may be on your own.
If you’ve always had insurance through a parent, spouse, or employer, you’re probably totally new to the choices that you need to make when enrolling in health insurance — not to mention how to actually get it!
The Freelancer’s Guide to Open Enrollment and the Health Insurance Marketplace
A brief history on the Affordable Care Act
You’ve probably heard of the Affordable Care Act (ACA) or “Obamacare.” The ACA was passed in 2010 and sought to make healthcare more accessible to millions of uninsured Americans.
Prior to the Affordable Care Act, 13.3% of the US population was uninsured. If you didn’t qualify for insurance from your parents, spouse, employer, or a government program, you didn’t have many options.
All forms of insurance are a numbers game. A bunch of people pay into a plan, some end up not using it, and some end up using a lot of it. You’re pooling your risk by investing in an insurance plan, and the insurance company uses the pooled cash to pay for the healthcare costs that come through in the form of claims from providers.
That’s where the Healthcare.gov marketplace comes in.
The ACA created a federal insurance marketplace. Now those who didn’t qualify for insurance before could pool their risk by buying into plans individually through Healthcare.gov. And it provides premium tax credits that help lower the cost of insurance for lower-income households.
In the process, it also mandated that all Americans enroll in some form of health insurance.
Do you need health insurance?
According to Investopedia, as of January 2019, it’s no longer required to have health insurance at a federal level. But it is still required at a state level in:
- New Jersey
- Washington, D.C.
So, for most Americans, you don’t technically require insurance.
Why would you want insurance?
If you have chronic pain, pre-existing conditions, or prescriptions — you will probably want insurance. But what if I’m healthy and have no reason to think that I won’t stay healthy?
Of course no one wants things to go wrong, and we don’t always expect the things that do go wrong. Insurance is your safety net to protect against unforeseen accidents, illnesses, and so on.
And if you care for other dependents (children or a spouse for example), that’s an even bigger risk you run by not having insurance.
When can you enroll in individual health insurance?
If you’re looking for marketplace coverage (i.e. you don’t qualify for employer or insurance from a spouse or parent) then you’ll need to purchase a policy during open enrollment.
Open enrollment is the period each year when you’re allowed to start, stop or change your health insurance plan. Typically, open enrollment is from November 1 through December 15.
The only way to get an individual health plan outside of open enrollment is by qualifying for a special enrollment period (SEP). A special enrollment period follows certain life events like losing health coverage, moving, getting married, having a baby, or adopting a child. And even if you qualify for a SEP, you need to enroll in a new plan within 60 days of that qualifying event.
How to get marketplace insurance
The federal marketplace has participating insurance providers all over the country. If you’ve had an insurance provider in the past, chances are they also have plans available on the health insurance marketplace.
You can purchase a plan directly from those providers, and in fact the marketplace helps you do that. But first you’ll want to choose a plan that works for you.
Think of the federal marketplace as the menu serving up your options. You can see what’s available, filter by things that are important to you, and ultimately choose a plan. But you’ll first need to apply for coverage.
The Healthcare.gov marketplace is about as clunky as you’d expect from a government-run website. The good news is it has improved, and there are several other private companies that have made improvements to the user interface on top of the federal marketplace.
And some more good news: those services are free of cost to use.
Three places you can start your application and enrollment:
This is the direct interface with the federal healthcare marketplace. The marketplace helps you estimate and directly apply your tax credit when enrolling in a plan (more on this later).
Health Sherpa offers the same core functionality as the federal marketplace, but with a much cleaner and more intuitive user interface. It will walk you through the same questions, help you apply the same credits, and get you to the same outcome.
Health Sherpa will even go so far as offering recommendations for your best option based upon the answers you provide.
Health Sherpa is behind the scenes of several other organizations and agents, including Catch Benefits. That means it may seem like you’re enrolling through one company (Catch for example) but it’s actually being processed through Health Sherpa.
Stride Health is a lot like Health Sherpa. The two companies are the only of their kind with a direct link to the Center for Medicare and Medicaid Services and both help you more easily apply for coverage through a custom dashboard.
Stride will also provide recommendations based upon your responses and was started about the same time at Health Sherpa.
Getting insurance outside of the marketplace
There are a couple different ways you can get health insurance not through an exchange like Healthcare.gov, Health Sherpa, and Stride Health. These are called off-exchange plans and can be purchased directly through an insurance company (like Oscar, Medical Mutual, and so on).
These companies may allow you to purchase a plan directly through them (as well as browse their exchange-specific plans too).
There are also group health insurance programs through religious organizations, like Medi-Share and Liberty Health Share. These programs are run by 501(c)3 not-for-profit organizations and available to individuals who agree to a Statement of Faith.
Finally, you may have heard of Direct Primary Care, which are an alternative to services paid for by insurance. These services charge a monthly, quarterly, or annual fee.
Be sure to do plenty of research on these options if you explore them, as they are not kept to the same standards as healthcare marketplace plans.
Most of the application is pretty straightforward. From the Healthcare.gov website, to be eligible to enroll in health coverage through the Marketplace, you:
- Must live in the United States.
- Must be a U.S. citizen or national (or be lawfully present). Learn about eligible immigration statuses.
- Can’t be incarcerated.
But there is more to the application process. Part of the application process is projecting your income to determine your eligibility for premium tax credits.
The premium tax credits are intended to help make healthcare accessible for low income individuals and families. So the lower your projected income, the higher your subsidy will appear to be.
If the Premium on the plan you selected is $230 per month, but you qualify for a $30 tax credit, you will pay $200 per month.
Warning on income estimates
If you don’t understand how the tax credits work, you may be tempted to “fake” your income in order to be “eligible” for a higher tax credit.
Your tax credits are totally dependent on the Adjusted Gross Income (AGI) that you report in your return in the following year. That means that if you apply for marketplace coverage in November 2019, and your coverage runs through the 2020 calendar year, your 2020 premium tax credit is dependent on the AGI reported on your 2020 tax returns.
If your 2020 tax return lists an AGI that is higher than your projected AGI from November 2019, you are responsible for paying back the tax credit you were given. There’s no cheating the system here — while you may lower your premiums month to month as you go through 2020, you will eventually pay the premium you truly owe based on your 2020 financial performance.
So if you don’t underestimate your income, and don’t withhold some cash to pay back your healthcare premiums, you may have a cash flow crisis.
The flipside is, if you overestimate your income and submit a lower AGI on your 2020 tax return, you may retroactively receive a tax credit for your health insurance.
One last thing on the income projections: if you are self-employed, you will likely be asked to provide proof of the income you are projecting. This may be difficult depending on how long you’ve been in business; it’s easy to refer back to the previous year’s tax return, but if you were employed, that won’t help much.
The healthcare marketplace provides several recommendations for how to prove your income. Your documents are reviewed by a human, and I’ve been able to upload a letter explaining my income as a PDF alongside previous tax returns.
A primer on health insurance terminology
At the end of the day, the way you experience your healthcare is ultimately determined by the plan you enroll in. And there are a lot of options to choose from, each of them complete with a summary of benefits and a ton of terminology that is probably new to you. Let’s start with that.
Premium: This is the dollar amount you pay every month to keep your plan active.
Covered services: These are the benefits your health insurance company helps to pay for. How much they cover depends on your specific plan and the services you’re getting. Generally, the higher the premium, the more your plan covers the cost of a covered service.
Deductible: The amount you have to pay out-of-pocket for covered services before your health insurance company starts paying for those services. If you hit your deductible, what you pay after that depends on your plan; you may have a copay or coinsurance, or you may owe nothing at all. Your Premiums do not count towards your deductible.
Out-of-pocket max: The most you could pay for covered health services in a calendar year (not including your monthly premiums). After you hit your max (again, not counting premiums) you won’t owe any money for covered services. This is typically around $8,000 for an individual or $16,000 for a family.
Copayment (copay): A fixed dollar amount you’re responsible for paying for a covered appointment, service, or prescription. If your plan says you have a $20 copay for a doctors appointment, that means you’ll pay $20 no matter what the visit actually costs — and your insurance covers the rest.
Coinsurance: This is similar to a copay, but it’s calculated as a percentage. If seeing your dermatologist requires a 20% coinsurance and the visit costs $100, you would owe $20 while your insurance company pays the rest.
Real life example
Let’s say you have a monthly premium of $260, a $6,000 deductible, and an out-of-pocket-max of $8,000.
Every month, just to be covered by the plan, you will pay $260. If you have a doctor’s visit, any cost you incur that isn’t covered by your plan will count towards your $6,000 deductible. If you go see a therapist, and your plan offers a $60 copay for therapy visits, you will still have $5,940 of your deductible leftover before insurance covers the cost.
But without insurance, you would have to pay full price for that appointment — it may be hundreds of dollars.
You may be thinking, “But I’m paying hundreds of dollars per month just for insurance!”
Here’s why that matters: If you are in an accident and find yourself facing hospital bills of $40,000 for your recovery, you will pay $8,000 (your out-of-pocket-max) and insurance will cover the remaining balance.
Of course we don’t want to pay $8,000 for medical care, but it’s certainly better than $40,000.
But remember that this counts for covered services. You’ll want to pay close attention to your plan’s Summary of Benefits to see what services are covered by a plan you want.
Choosing a plan
When it’s ultimately time to choose your plan, there are a few major levers that you can pull to choose the best plan for you.
- Your existing healthcare needs
Your existing healthcare needs
Do you have prescription medications, preferred doctors, or frequent visits? If you already expect to use your healthcare plan a lot, you’ll likely need to choose a higher-priced plan with stronger coverage.
A rule of thumb for considering strength of coverage is the cost of Premiums and the Metal level of your coverage (bronze, silver, gold, platinum — more on this soon). Of course, this is just a starting point — be sure to read your summary of benefits.
The marketplace applications will prompt you to enter your medications and existing doctors to help you identify plans that fit those needs.
Do you travel a lot? If you do, you will likely want to consider PPO plans as opposed to HMO plans (more on that below).
If you do not have existing needs and think you will have a pretty healthy year, you may want to determine your coverage based upon your budget. But remember, plans with lower premiums often have higher deductibles and copays.
Types of plans
Your insurance plan type determines which doctors you can see and how much you have to pay for care. When comparing plans, you’ll want to pay attention to how they cover in-network and out-of-network care.
Health Maintenance Organization (HMO) plans require you to select a Primary Care Provider (PCP) who serves as a “gatekeeper” for all additional care you receive. Referrals from this PCP are required before you can receive care from a specialist, lab, or medical facility — even for preventative screenings.
There are a couple of exceptions: emergencies and OB-GYN.
HMO plans are not very flexible and will not cover out-of-network providers. Said another way, ensure that any provider you see is covered by your HMO before seeing them or you will likely be stuck with the whole bill.
Preferred Provider Organization (PPO) plans usually provide coverage of care done by providers both in-network and out-of-network. You do not have to choose a PCP and referrals are not required.
These plans are often good ideas if you travel a lot and may find yourself needing medical care outside of your home state. However, out-of-network care is still going to be more expensive than in-network care.
HSA-eligible plans allow you to pay for medical expenses from a Health Savings Account (or HSA). You can contribute money towards an HSA account pre-tax and use that income to pay for qualified medical expenses (excluding your premiums). Qualified medical expenses include deductibles, dental services, vision care, prescription drugs, co-pays, psychiatric treatments, and other qualified expenses not covered by your health insurance plan.
This helps every dollar stretch further for your healthcare, but often come attached to higher-premium plans.
Metal ratings for insurance plans
So what’s the deal with those metals?
A good rule of thumb is that the more valuable the metal, the stronger (and more expensive) the coverage. Technically, it’s an actuarial value of how much cost is covered by the insurance company vs. the individual. A bronze plan covers the least amount out-of-pocket, and platinum covers the most.
Roughly, insurance would cover out of pocket:
Bronze: 60% of expenses
Silver: 70% of expenses
Gold: 80% of expenses
Platinum: 90% of expenses
But remember, higher metal grades mean higher premiums. If you expect fewer medical expenses, you’ll likely want lower premiums through lower metal ratings.
Dental and Vision
The marketplaces offer dental and vision insurance too. The same thinking applies for Dental and Vision as above — consider your specific needs and likelihood of what you’ll need.
Some vision plans will help towards the cost of new glasses or contacts.
Most dental plans will cover the cost of routine cleanings as well as pay towards other specialty services.
Both plans are typically at a much lower monthly premium and come with their own summary of benefits just like the health insurance plans.
Enrolling in your chosen plan(s)
Once your income is confirmed, your application is approved, and your plan is chosen, you will be asked to pay your first month’s premium(s) before January to activate your coverage for the following calendar year.
Your plans will be tied to accounts with each provider, and the marketplace you’ve chosen should route you to their websites to setup your account and confirm your plan.
I know this sounds like a lot — and it is. The healthcare system is tough to navigate, especially for self-employed freelancers like me.
But it’s something you can wrap your head around with the guidance here and it’s really important. While it’s no longer illegal to not have insurance, you can really find yourself in a huge bind quickly through unexpected illness or accident.
Remember that new private companies like Health Sherpa, Stride Health, and Catch.co (which uses Health Sherpa) will make recommendations for you based upon your responses to their questions. These tools haven’t always been in place and make it a lot easier to navigate now.
All marketplaces have agents standing by to help answer your questions as you go through the process too.
Remember that open enrollment is from November 1 through December 15, and be sure to select a plan that is right for you before then!