Despite what many people think – especially when they’re young – health insurance is not an optional expense. It’s a necessity.
You need it to protect yourself physically and financially. And while no one wants to pay more than they have to. Insurance is like anything else: You get what you pay for.
That’s one lesson many people have learned about discount insurance these past few years.
What COVID revealed about discount insurance plan caps
The past two years of COVID have shown that large claims can and DO happen. If you have a non-traditional plan that caps out at $1 million or less, you’d be stuck paying any bills more than that amount.
One of the most common tricks to get cheaper insurance is to get a plan that caps benefits. Often these caps sound like something you’ll never need to worry about. For instance, you’ll get a plan that only pays out benefits up to $1 million.
The last thing you need to be thinking about when you or a loved one goes into the hospital with a life-threatening illness is whether your insurance is enough to cover the bill.
By trying to save yourself a few dollars now, you could set yourself up for disaster if you have a large claim down the road. The best way to avoid that is to purchase health insurance without a cap on benefits.
What is a health insurance cap?
A health insurance cap – also known as a health plan limit – defines the maximum amount your insurance will pay out. If you have an insurance plan with a $1 million plan limit, then your insurance will only pay a maximum of $1 million in total.
You pay the deductible, then your insurance pays up to $1 million in coverage for costs. If your medical costs exceed $1 million, you are on the hook for any costs over the $1 million limit.
Where can I get affordable health insurance plans with no cap?
A common misconception is that good health insurance is outrageously unaffordable. In reality, however, getting affordable health insurance is easier than you think. In fact, if you get an ACA healthcare plan – also known as an Obamacare plan – it will never have a cap. Only non-ACA plans have caps.
So, as long as you go ACA, you won’t have to worry about a plan limit coming back to bite you. And under most circumstances, the cost of an ACA-qualified plan is less than people realize.
A tax credit makes health insurance easier to afford and new rules make it easier to qualify
One trick that the federal government has to make health insurance affordable is to offer a tax credit. The Premium Tax Credit aims to do just that. You can either use it in the traditional sense, as a tax credit to increase the size of your refund at tax time, or you can apply it to actually lower your monthly insurance bill.
It’s called Advance Premium Tax Credit (APTC) and the majority of people use this to lower their monthly premium. Less than 1% use this when they file taxes.
The trouble with the tax credit is that the original rules were written in a way that didn’t help people who got insurance through their employer. With an employer-sponsored plan, the employer must pay 50% of the eligible employee’s premium. That 50% payment of premiums by an employer usually meant that dependents were ineligible for APTC.
This condition led to premiums being unaffordable for many families because the tax credit eligibility was determined using only the employee’s portion of the premium paid. Families were unable to qualify for a tax credit.
The family glitch will fix this and eligible dependents will be able to receive tax credits if their portion of the employer’s plan premium exceeds 9.12% of the household income.
It’s being written by the Centers for Medicare and Medicaid Services (CMS) and is expected to be implemented in January 2023.
A broker offers the best path to affordable insurance while avoiding scams
Always purchase health insurance through a broker. They’ll help you find the coverage you need while avoiding any scams.
Brokers represent all health insurance companies to match customers with the right plan for their needs. It’s much different than the insurance agents who work with specific companies. It’s in an insurance agent’s best interest to recommend one of their company’s plans – even when it’s not the best fit for the customer.
For example, let’s say your family exceeds the income cap for the premium tax credit. In this case, there are alternatives to traditional health insurance for individuals and families whose incomes exceed the tax credit threshold but still need affordable premiums. Your broker will help you find those.
When choosing a broker, make sure to check and ensure they sell ACA plans. That way, you can avoid those caps we talked about earlier. And when the new premium tax credit rules take effect in 2023, you can discuss your insurance options with your broker to see if other plans would be more beneficial.
What you risk by going through an insurance agent
I get calls from people all the time who find out the hard way that they didn’t get the plan that was presented to them. Recently, I talked to a woman that purchased a plan through an insurance agent from U.S. Health/Freedom Life. She called me after she fell off a ladder and shattered her ankle.
She’d been told by the agent that she has a Cigna PPO, but that wasn’t entirely accurate. She really had a U.S. Health/Freedom Life plan that used Cigna’s network. She ended up with a bill of $40,000 because her plan didn’t offer the coverage she thought she had.
I had another call with a man facing a similar situation after a cancer diagnosis. He had to delay treatment because his plan didn’t offer the coverage needed.
It’s important to note that these types of plans are NOT considered credible coverage. What’s more, ending them does not allow you to purchase a new plan outside of open enrollment. So, the man’s cancer treatment was delayed significantly while we waited for new coverage.
Affordable health insurance through nontraditional plans
Nontraditional plans serve a purpose for people looking to cut costs. However, there can be hidden costs that you, as a consumer, are unaware of and could end up costing you if you have a claim. So, again, learn a little about your options below, but then have a conversation with your broker to find the best fit for you.
HealthShare plans
These plans have existed for many years and can be a good fit, but only if you know what you are purchasing. Do your homework, check with your broker, and ask what the maximum benefit is on the plan that you want to purchase.
And remember, plans with a cap on benefits are not advised. You could find yourself owing hundreds of thousands of dollars in the event of a large claim that exceeds the plan limits. There are HealthShare plans, however, without a cap on benefits.
Network plans
These plans are often sold by captive agents that will tell you that the plan is a PPO plan. This type of plan is often underwritten, meaning you are asked what preexisting conditions you have. These are bare-bones indemnity plans purchased with a hospital, critical illness, and accident coverage.
Short-term medical plans
These plans are a good option if you are between jobs and need coverage for a limited time. This should not replace ACA coverage, as short-term plans have are caps on benefits and don’t provide coverage for preexisting conditions.
How much does working with a broker cost?
Here’s where we get the best news. Working with a broker costs you absolutely nothing! You will pay the same amount to use a broker as you do to purchase insurance without one.
Most brokers are paid per enrollment, not how expensive your plan is. They have no incentive to sell you a more expensive plan because they’re not working toward some extra commission and you can feel confident that they’re dedicated to helping you get the most affordable plan.
Need to find affordable health insurance? Call for a free consultation
If you still have questions about ACA plans, caps, and alternative insurance, you can call me for a free consultation. Just call 844-402-3008 and I’ll be happy to assist you.
