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How Much Should You Pay For Health Insurance?

When it comes to health insurance, one of the most common questions I hear is, “Who pays for that?” At the risk of sounding like a smart aleck, the simple answer is: you do.

When it comes to health insurance, one of the most common questions I hear is, “Who pays for that?” At the risk of sounding like a smart aleck, the simple answer is: you do.

But that does not necessarily mean you’re responsible for 100% of the cost of health insurance. There are three basic categories of health insurance sources: employers, individuals buying health insurance, and government programs. In this article, we’ll examine each category in greater detail to more fully answer the question, “Who pays for that?”

Coverage Through Your Employer

Employer coverage is pretty straightforward: you work for somebody, they offer coverage, they pay for a majority of the premium, and you enroll. Employers with over fifty employees are required by the ACA to offer healthcare coverage to their full-time employees (those working over thirty hours per week) or pay a $2,000 penalty for each full-time employee every year. Most elect to offer the coverage.

They must offer at least one plan that complies with all ACA guidelines, including the essential coverage, the minimum plan design, and maximum employee monthly contribution of 9.86 percent of household monthly income for 2019 single coverage. Employers with fewer than fifty employees have the option to offer coverage or not; it depends on their financial situation. If you work for an employer who does not offer coverage, you will need to investigate options: purchasing directly or, depending on your financial situation, looking into government-sponsored plans.

Plan Options

Most employers offer multiple options for their employees. The range of options addresses plan designs that impact how much is covered and what you’ll have to spend if and when you use the healthcare system. Your premium cost impacts how much of your paycheck is paid monthly for your selected coverage. The options you are presented will be from the coverages we discussed PPO (Preferred Provider Organization), HMO (Health Maintenance Organization), or High Deductible Health Plan, usually with a Health Savings Account. Many offer tax-deferred savings vehicles to help offset the cost of healthcare.

Individuals Buying Directly

Buying health insurance directly under Obamacare has been like trading one nightmare for another. Before Obamacare, people with existing conditions were denied coverage. With Obamacare, those people can now buy coverage, but more and more often they can’t afford the monthly health insurance premiums or even find coverage.

Many of the national health insurance companies (Anthem, Cigna, Aetna, United Healthcare) have reduced the number of states to which they offer individual health insurance to the point that a number of counties had only one health insurance carrier option in 2019. And increasingly, the options offered have smaller provider networks.

Bottom line: if you are buying directly, you will probably need to consider increasing your deductibles and out-of-pocket costs to offset premium increases.

The Kaiser Family Foundation, www.kff.org, does an excellent job of tracking health insurance carriers offering coverage by state and the premium rate increases or decreases filed by health plans in each state. They are already compiling 2019 health insurance carrier offerings by carrier by state. Please review their site for updates under the heading Tracking Premium Changes on ACA Exchanges.

Doesn’t Obamacare provide premium subsidies for non-government health insurance to offset the cost? Yes, it does. Obamacare provides premium tax credits and cost sharing subsidies. A portion of the monthly health premiums may be offset for individuals earning less than 400 percent of the federal poverty level (FPL).

Interestingly, 84 percent of the people who signed up for individual health insurance since 2014 received subsidies. Luckily, because of inflation protection in the ACA subsidies, inflation increases are not passed on to those with subsidies. Their subsidies increased as the premium increased, keeping them whole. The people who bore the brunt of the increases were those without subsidies, and not all of them are rich.

The most efficient way to find out what plans, pricing, and subsidies are available to you is to access healthcare.gov or your state-sponsored healthcare exchange. The federal government’s website covers thirty-seven states and the District of Columbia, and will direct you to state-sponsored exchanges. They will start the session by asking basic financial questions that will determine whether you qualify for a subsidy.

In 2019, persons earning up to $48,560 may qualify for an individual’s health insurance subsidy while individuals earning up to $83,120 may qualify for a family health insurance subsidy. The dollar amounts are adjusted annually.

An alternative is Healthsherpa.com, which covers all states and all available health plans. They are a private company whose mission statement is “to help every American feel the comfort and security of having health coverage. [They] use design, technology, and customer service by real people to make insurance easier to understand, faster to sign up, and simpler to use.” The major differences are an easier and faster system, and real-time help. They provide counselors via chat rooms who walk through your enrollment and continue the chat room assistance throughout the year.

Government Programs

Note that the following information is true as I write this article, but—as we all know—nothing stays the same, especially in the government and in the world of healthcare. Visit www.healthcare.gov for the most up-to-date information about the status of the healthcare system in the US and what it means to you.

Medicaid

Medicaid is a joint federal and state program that, together with the Children’s Health Insurance Program, makes up the single largest source of health coverage in the United States. Its goal is to provide low-income individuals, families, and children health insurance with little or no premiums, and little or no out-of-pocket medical expenses.

The Affordable Care Act of 2010 created the opportunity for states to expand Medicaid to cover nearly all low-income Americans under age sixty-five. Eligibility for children was extended to at least 133 percent of the federal poverty level (FPL) in every state (most states cover children to higher income levels), and states were given the option to extend eligibility to adults with income at or below 133 percent of the FPL.

The majority of states have chosen to expand coverage to adults, and those that have not yet expanded may choose to do so at any time. Eighteen states have not expanded coverage as of 2019. They are Alabama, Florida, Georgia, Idaho, Kansas, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.

The 2019 federal poverty level (FPL) income numbers are used to calculate eligibility for Medicaid and the Children’s Health Insurance Program (CHIP).

Medicaid Benefits

States establish and administer their own Medicaid programs and determine the type, amount, duration, and scope of services within broad federal guidelines. Federal law requires states to provide certain mandatory benefits and allows states the choice of covering other optional benefits. Mandatory benefits include services like inpatient and outpatient hospital services, physician services, laboratory and x-ray services, and home health services, among others. Optional benefits include services like prescription drugs, case management, physical therapy, and occupational therapy.

You can enroll through healthcare.gov. Additional state-by-state information is on medicaid.gov. Or, you can try the American Council on Aging’s Medicaid Assistance site at medicaidplanningassistance.org/state-medicaid-resources. They provide state-by-state names and contact info, and free planning advisor services.

Children’s Health Insurance Program (CHIP)

Children’s Health Insurance Program (CHIP) is a federal/state health program managed by the states. It provides medical coverage for individuals under age nineteen whose parents earn too much income to qualify for Medicaid, but not enough to pay for private coverage. Program coverage varies from state to state, but all states’ CHIP plans cover routine checkups, immunizations, doctor visits, prescriptions, dental care, vision care, hospital care, laboratory services, x-rays, and emergency services. Some states also cover parents and pregnant women. Its goal, like Medicaid, is to provide health insurance with inexpensive or no premiums or out-of-pocket medical expenses.

It’s cumbersome to get coverage through CHIP, but it could be a huge winner for your family if you qualify. If you make up to $40,000 for, say, a family of three, you can still get Medicaid coverage. CHIP, on the other hand, is for people who make more than that but still have a tough time affording coverage. We run into plenty of people who keep their employer’s coverage for themselves but carve off their kids and put them on CHIP. To sign up, you can call 1-800-318-2596, or you can begin the process by completing an insurance application on healthcare.gov. The application will determine if you qualify for the program and will notify your state agency. Your state agency will contact you about enrollment. My advice is to do both and follow up.

Medicare

Medicare is the guaranteed-issue, government health insurance program for individuals over sixty-five, certain younger people with disabilities, and people with End Stage Renal Disease (permanent kidney failure requiring dialysis or transplant). It does not have income requirements to join. Its goal is similar to Medicaid in providing affordable healthcare insurance to seniors. All four components of Medicare (Parts A, B, C, and D) require monthly premiums, deductibles, and out-of-pocket costs for services.

Different parts of Medicare help cover specific services:

Part A: Hospital Insurance. It covers inpatient hospital stays, some home healthcare, stays in skilled nursing facilities, and hospice care.

Part B: Medical Insurance. It covers outpatient care, preventive services, medical supplies, and some doctors’ services.

Part C: Medicare Advantage Plans. Offered by private companies that contract with Medicare. They provide Part A and Part B coverage, and most cover Part D benefits.

Part D: Prescription Drug Coverage. This is provided by private insurance companies and adds drug coverage to the other parts of Medicare.

Additional information is available at medicare.gov, or for supplemental assistance and supplemental policies, consult the American Association of Retired Persons (AARP).

But that does not necessarily mean you pay 100 percent of the cost. There are three basic categories of health insurance sources: employers, individuals buying health insurance, and government programs. In this article, we’ll examine each category in greater detail to more fully answer the question, “Who pays for that?”

Coverage Through Your Employer

Employer coverage is pretty straightforward: you work for somebody, they offer coverage, they pay for a majority of the premium, and you enroll. Employers with over fifty employees are required by the ACA to offer healthcare coverage to their full-time employees (those working over thirty hours per week) or pay a $2,000 penalty for each full-time employee every year. Most elect to offer the coverage.

They must offer at least one plan that complies with all ACA guidelines, including the essential coverage, the minimum plan design, and maximum employee monthly contribution of 9.86 percent of household monthly income for 2019 single coverage. Employers with fewer than fifty employees have the option to offer coverage or not; it depends on their financial situation. If you work for an employer who does not offer coverage, you will need to investigate options: purchasing directly or, depending on your financial situation, looking into government-sponsored plans.

Plan Options

Most employers offer multiple options for their employees. The range of options addresses plan designs that impact how much is covered and what you’ll have to spend if and when you use the healthcare system. Your premium contributions impact how much of your paycheck is paid monthly for your selected coverage. The options you are presented will be from the coverages we discussed (PPO, HMO, HDHP/ HSA). Many offer tax-deferred savings vehicles to help offset the cost of healthcare.

Individuals Buying Directly

Buying health insurance directly under Obamacare has been like trading one nightmare for another. Before Obamacare, people with existing conditions were denied coverage. With Obamacare, those people can now buy coverage, but more and more often they can’t pay for the insurance coverage or find coverage.

Many of the national health carriers (Anthem, Cigna, Aetna, United Healthcare) have reduced the number of states to which they offer individual health insurance to the point that a number of counties had only one health insurance carrier option in 2019. And increasingly, the options offered have smaller provider networks.

Bottom line: if you are buying directly, you will probably need to consider increasing your deductibles and out-of-pocket costs to offset premium increases.

The Kaiser Family Foundation, www.kff.org, does an excellent job of tracking health insurance carriers offering coverage by state and the premium rate increases or decreases filed by health plans in each state. They are already compiling 2019 health insurance carrier offerings by carrier by state. Please review their site for updates under the heading Tracking Premium Changes on ACA Exchanges.

Doesn’t Obamacare provide premium subsidies for non-government health insurance to offset the cost? Yes, it does. Obamacare provides premium tax credits and cost sharing subsidies. A portion of the monthly health premiums may be offset for individuals earning less than 400 percent of the federal poverty level (FPL).

Interestingly, 84 percent of the people who signed up for individual health insurance since 2014 received subsidies. Luckily, because of inflation protection in the ACA subsidies, inflation increases are not passed on to those with subsidies. Their subsidies increased as the premium increased, keeping them whole. The people who bore the brunt of the increases were those without subsidies, and not all of them are rich.

The most efficient way to find out what plans, pricing, and subsidies are available to you is to access healthcare.gov or your state-sponsored healthcare exchange. The federal government’s website covers thirty-seven states and the District of Columbia, and will direct you to state-sponsored exchanges. They will start the session by asking basic financial questions that will determine whether you qualify for a subsidy.

In 2019, persons earning up to $48,560 may qualify for an individual’s health insurance subsidy while individuals earning up to $83,120 may qualify for a family health insurance subsidy. The dollar amounts are adjusted annually.

An alternative is Healthsherpa.com, which covers all states and all available health plans. They are a private company whose mission statement is “to help every American feel the comfort and security of having health coverage. [They] use design, technology, and customer service by real people to make insurance easier to understand, faster to sign up, and simpler to use.” The major differences are an easier and faster system, and real-time help. They provide counselors via chat rooms who walk through your enrollment and continue the chat room assistance throughout the year.

Government Programs

Note that the following information is true as I write this article, but—as we all know—nothing stays the same, especially in the government and in the world of healthcare. Visit www.healthcare.gov for the most up-to-date information about the status of the healthcare system in the US and what it means to you.

Medicaid

Medicaid is a joint federal and state program that, together with the Children’s Health Insurance Program, makes up the single largest source of health coverage in the United States. Its goal is to provide low-income individuals, families, and children health insurance with little or no premiums, and little or no out-of-pocket medical expenses.

The Affordable Care Act of 2010 created the opportunity for states to expand Medicaid to cover nearly all low-income Americans under age sixty-five. Eligibility for children was extended to at least 133 percent of the federal poverty level (FPL) in every state (most states cover children to higher income levels), and states were given the option to extend eligibility to adults with income at or below 133 percent of the FPL.

The majority of states have chosen to expand coverage to adults, and those that have not yet expanded may choose to do so at any time. Eighteen states have not expanded coverage as of 2019. They are Alabama, Florida, Georgia, Idaho, Kansas, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.

The 2019 federal poverty level (FPL) income numbers are used to calculate eligibility for Medicaid and the Children’s Health Insurance Program (CHIP).

Medicaid Benefits

States establish and administer their own Medicaid programs and determine the type, amount, duration, and scope of services within broad federal guidelines. Federal law requires states to provide certain mandatory benefits and allows states the choice of covering other optional benefits. Mandatory benefits include services like inpatient and outpatient hospital services, physician services, laboratory and x-ray services, and home health services, among others. Optional benefits include services like prescription drugs, case management, physical therapy, and occupational therapy.

You can enroll through healthcare.gov. Additional state-by-state information is on medicaid.gov. Or, you can try the American Council on Aging’s Medicaid Assistance site at medicaidplanningassistance.org/state-medicaid-resources. They provide state-by-state names and contact info, and free planning advisor services.

Children’s Health Insurance Program (CHIP)

Children’s Health Insurance Program (CHIP) is a federal/state health program managed by the states. It provides medical coverage for individuals under age nineteen whose parents earn too much income to qualify for Medicaid, but not enough to pay for private coverage. Program coverage varies from state to state, but all states’ CHIP plans cover routine checkups, immunizations, doctor visits, prescriptions, dental care, vision care, hospital care, laboratory services, x-rays, and emergency services. Some states also cover parents and pregnant women. Its goal, like Medicaid, is to provide health insurance with inexpensive or no premiums or out-of-pocket medical expenses.

It’s cumbersome to get coverage through CHIP, but it could be a huge winner for your family if you qualify. If you make up to $40,000 for, say, a family of three, you can still get Medicaid coverage. CHIP, on the other hand, is for people who make more than that but still have a tough time affording coverage. We run into plenty of people who keep their employer’s coverage for themselves but carve off their kids and put them on CHIP. To sign up, you can call 1-800-318-2596, or you can begin the process by completing an insurance application on healthcare.gov. The application will determine if you qualify for the program and will notify your state agency. Your state agency will contact you about enrollment. My advice is to do both and follow up.

Medicare

Medicare is the guaranteed-issue, government health insurance program for individuals over sixty-five, certain younger people with disabilities, and people with End Stage Renal Disease (permanent kidney failure requiring dialysis or transplant). It does not have income requirements to join. Its goal is similar to Medicaid in providing affordable healthcare insurance to seniors. All four components of Medicare (Parts A, B, C, and D) require monthly premiums, deductibles, and out-of-pocket costs for services.

Different parts of Medicare help cover specific services:

Part A: Hospital Insurance. It covers inpatient hospital stays, some home healthcare, stays in skilled nursing facilities, and hospice care.

Part B: Medical Insurance. It covers outpatient care, preventive services, medical supplies, and some doctors’ services.

Part C: Medicare Advantage Plans. Offered by private companies that contract with Medicare. They provide Part A and Part B coverage, and most cover Part D benefits.

Part D: Prescription Drug Coverage. This is provided by private insurance companies and adds drug coverage to the other parts of Medicare.

Additional information is available at medicare.gov, or for supplemental assistance and supplemental policies, consult the American Association of Retired Persons (AARP).

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