For most Americans, the question isn't if they need health insurance. "Almost all of us have heard the horror stories of people who have a fluke accident and end up in the emergency room," says USAA Advice Director Sean Scaturro. "Two days — or even hours — later, they may walk out with a crippling amount of medical debt."
Instead, the question is: How do I get health insurance? "The process of getting new health insurance can feel very overwhelming to people who worry they won't be able to afford coverage. Perhaps they don't understand what they're looking at when they go to apply for it," says Scaturro. "Luckily, health insurance is available to more Americans than ever under the Patient Protection and Affordable Care Act, or ACA, which created a marketplace of plans with a range of costs and benefits."
Step 1: Determine what kind of health insurance coverage you need.
When shopping for health insurance, many people look for the lowest-cost option. Instead, Scaturro suggests making a list of you or your family's needs. There are many different health care plans out there; some that offer coverage for limited needs, some that are for temporary needs and some that are comprehensive.
"Families with young children can find themselves on a first-name basis with the staff at their pediatrician's office, so they should consider a plan that offers comprehensive benefits like an ACA-qualified health insurance plan," says Scaturro. "But a young, single person who is healthy may not need to have the full comprehensive benefits of a qualified plan. If they missed their enrollment window or if they want options outside of the ACA offered plans, a non-qualified plan type like a short-term health plan or an indemnity-style or fixed benefit plan could be an option."
What's an ACA-qualified health insurance plan? See note 1 It's a plan that follows established limits on deductibles, copays and out-of-pocket maximum amounts. It also provides coverage for 10 essential services, including things like ambulatory and emergency services, hospitalization, maternity and newborn care, mental health treatment, prescription drugs and pediatric services.
"The ideal state is to have an ACA-qualified plan because you never know your future, and it's hard to predict what you'll need," says Scaturro.
Having adequate health insurance is foundational to your health and wellness planning. Figure out what other type of ongoing care you or your family members may need in additional to medical and wellness services. If you get coverage through an employer, you may also be able to enroll in disability insurance as well as dental and vision insurance. Other plan types and benefits may be available as well. Whether you get coverage through your work or if you plan to get it through the marketplace, consider your needs, the costs, and your utilization when deciding which coverages are needed. Dental insurance may be a no brainer for a family of five with kids needing braces, but the decision may vary for a young single person with good dental history.
Step 2: Figure out which health insurance coverage you can afford.
First, figure out whether you're eligible for premium tax credits under the ACA. These subsidies can offset your monthly premiums and may be available to you depending on your family size and the projected household income.
Most states have aligned to the federal expansion of Medicaid, which provides affordable health care coverage for low-income families. If your family household income is 138% of the federal poverty limit (FPL), you'd be enrolled in a Medicaid plan. If your income is between 137% and 100% of the FPL, you'll likely qualify for assistance on your health insurance through the ACA marketplace.
For example, let's say you live in Arizona and are in a family of three or more. If your yearly income is $30,000 or less, your health care will be fully funded. If you make $50,000 a year, your insurance will be supported by $56 a month.
There may be other cost-saving options available as well, based on plan type. "Understanding what you can afford outside of whatever the ACA is going to provide for you is powerful knowledge," says Scaturro. "Be sure to budget for out-of-pocket costs and understand cost-sharing factors of different plan types."
Recent changes to an IRS ruling may make more Americans eligible for subsidized health insurance. The “family glitch” effect has previously prevented eligibility for premium tax credits (subsidies) for individuals that may have access to minimum essential coverage, like coverage offered through their employer.
Premium tax credit eligibility is based on an affordability test, in which an employee must contribute more than a percentage of their household income towards their premium. For example, if an employee paid more than 9.61% of their household income in 2022, they would be eligible for premium tax credits.
The IRS interpretation of the premium tax credit portion of the tax code determined that the affordability test would be based on the cost for the employee only, not considering the extra cost to extend coverage to their family members. The Kaiser Family Foundation estimates that the “family glitch” prevented more than 5 million Americans from accessing affordable health care, nearly half of those people were children of low-income workers.
With the ruling revision and other governmental actions taken, its estimated that nearly 4.8 million more Americans will be eligible for premium tax credits helping to improve their ability to provide health care benefits to their households.
Step 3: Review the prescription benefits that health insurance options offer.
If someone in your family is on maintenance or ongoing prescription medications, see what they'll cost. Health plans have a list of prescription drugs they cover. When purchasing a new health insurance plan, be sure to choose a plan that includes any brand-name drugs you use, as they're covered at a higher level.
Step 4: Decide which provider you'll see.
If keeping your current health care provider is important to you, find a plan with your provider in its network. Out-of-network providers may be covered at a lower rate, if at all, than those in-network. On the other hand, if you find a plan that saves you a lot of money but makes your doctor or specialist out-of-network, consider the savings versus having to switch providers.
Two popular health plan types are Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO). Usually, HMOs have a controlled network of doctors and specialists. "With an HMO, you'll likely see a doctor within a designated network and may need prior authorization from your insurance provider to see a specialist, if needed," Scaturro explains. PPOs, on the other hand, give you control over which doctors and specialists you can see. "With a PPO, you're in the driver's seat. You can see whoever you want, but usually you have to pay a little more for that control."
Step 5: Plan for out-of-pocket costs, potentially with a supplemental health plan.
The cheapest monthly premium may not always be the right answer if it carries a deductible you can't afford. It's important to pick a plan that has a level of financial responsibility you can budget for so you can use your plan when needed without the fear of relying on credit cards or other debt.
"A recent study found that if people feel like they can't afford to pay their deductible, they'll avoid getting the care they need — and that only exacerbates their health problem," says Scaturro. "It starts with you feeling like you can't afford to go to the doctor, but eventually your health worsens and you can't go to work. And the financial problems grow from there."
In general, if you find yourself struggling to budget for larger, unexpected expenses, it may be beneficial to have a supplemental health plan in addition to your health insurance. These types of plans can be for specific illnesses or accidents. There are also plans like fixed indemnity plans that can help to offset your out-of-pocket costs, such as your health insurance deductible.
How does an indemnity plan work? With traditional health insurance, you pay the deductible at the point of care, and then the rest comes out of insurance. Indemnity policies are just the opposite. Let's say you break your foot and go to the emergency room. If you have an indemnity plan that covers emergency room visits, you may receive benefits under that plan separate from your health insurance that can then be used toward whatever you want to, like your deductible or other out-of-pocket costs. However, most indemnity plans are limited to a specific benefit amount and stop providing benefits once that limit is met.
Scaturro stresses that indemnity plans should only be used as a supplement to traditional insurance, not as your sole solution. "If you have a catastrophic health event, the amount in your indemnity plan won't even begin to cover it," he says.
Consider employer-provided health insurance.
Employers get a tax break on the health care costs they provide for their employees, so it's usually the most affordable option. "About 50% of the country gets their health insurance through their employer," says Scaturro. "If you were to do a cost comparison, you'd likely find it's cheaper than going with a plan that you pay for entirely on your own."
With that said, choosing the best health care for you and your family should not come down to price alone. Remember step one: Make a list of you or your family's needs. Whether you go with your employer's plan or an ACA plan, be sure it has the coverage you need.
Get started looking for new health insurance.
Now that you've made a list of the health insurance coverage you and your family need, it's time to go shopping. There are two ways to go about it: either through the federal marketplace, healthcare.gov, or through a private provider, such as USAA. "You can see which plans are available in your area by visiting usaa.com/healthsolutions." Scaturro says. "If there's not a plan offering, visit healthcare.gov." See note 1
The open enrollment period is the time of year that anybody can purchase health insurance through healthcare.gov without changing jobs or changing marital status, which would be considered qualifying events for plan enrollment at any time. See note 1 Usually, open enrollment is a two-month period toward the end of each year.
If you're looking to change plans, you may need to wait until the next enrollment period.
During open enrollment, people who may or may not have coverage in place already or want different coverage, can shop, compare and change plans.
"In the past, people used short-term health insurance as a bridge if they needed insurance but didn't have a qualifying event," Scaturro says. In most cases, those short-term plans don't offer all the same essential services or qualifications that an ACA plan offers, so you're taking on a financial risk.
A health savings account may be right for you.
Health savings accounts can be great way to reduce your taxable income and help you save for medical expenses. You're eligible for an HSA if you're enrolled in a high-deductible health insurance plan. These eligibility limits change annually, check the IRS resource on HSA plans for the most current information. See note 1 When you're shopping for plans, look for the ones tagged as "HSA-eligible."
Here's how an HSA works: You pay into to your HSA, taking a deduction on your payments. You're able to decide how your savings earns interest, through interest-bearing accounts or investments, and when you take that money out for qualified medical expenses, it comes out tax-free.
Another HSA benefit: When you put your money into an HSA, it can carry over from one year to the next. If you don't visit the doctor often or if you've been blessed with good health and have a good health record, you can pool money up year over year. That way, you can use it to plan for the future.
"In your retirement years, you can use that money to pay for things that supplement your Medicare, and you can use it to offset normal everyday health care expenses," Scaturro says.
Ready to shop for new health insurance?
Members with questions can contact a USAA specialist about their health insurance coverage. "We can help point them in the right direction if we have policies available or to the appropriate state-regulated or federal exchange," Scaturro says.