With multiple plan types offered and a requirement to obtain coverage or otherwise pay a penalty, Americans are scrambling to get coverage without knowing much about their options. After explaining the difference between exchange-based and privately sold insurance in conversation recently, it seemed the person still didn’t understand why it mattered or which they may want to choose. Unfortunately, in many cases, the confusion and conflict surrounding the Affordable Care Act may lead to a complete avoidance of insurance from some, and uninformed decisions from others.
One major question on the consumer end remains, which do you choose, and what are the advantages and disadvantages of each coverage type for individuals and families? You can shop on the exchange and receive enticing discounts with premium tax credits, or you can buy a plan off the exchange for a number of reasons that have not received as much publicity as the government plans.
Coverage Comparison: Individual Plans On and Off the Exchange
About Individual Health Insurance
The individual health insurance market includes both plans inside and outside of the marketplace. Before the ACA was in place, the only plans offered to individuals and families were sold and administered solely by private health insurers. With the introduction of the health reform law, people buying coverage for themselves (not through an employer) could shop for coverage either through health insurance companies or agents as before, OR on the marketplace — where health plans created by the ACA are sold.
Plans sold on the marketplace are also available from health insurance carriers, but they are molded to fit federal criteria for pricing and coverage. Health insurance exchanges provide coverage that is regulated by federal government or a state-level organization. It’s hard to call exchanges public health plans when they’re sold by private insurers, so it’s essentially a marriage of private (for-profit and nonprofit companies) and public (the government) all in one place.
Because some carriers and agencies sell both types of coverage (including East Coast Health Insurance), it can be hard to know whether the exchange or a private plan is best.
Not much is different, but the few differences between can be very important depending on individual needs. Below, you’ll see a few basic plan details that are required for plans on and off the exchange.
Different: Premium Tax Credits
A large percentage of health insurance shoppers qualify for the premium tax credits created by the health care law. Eligibility for financial assistance that reduces health plan premiums will be the deciding factor for many consumers. Paying less for coverage is always appealing, and therefore, the marketplace may be the best source of insurance for you.
Your income must be between 100 and 400 percent of poverty in most states, or 133 to 400 percent of poverty in states that have expanded Medicaid, to qualify for a subsidy. Lower income households can also receive assistance with cost sharing, such as coinsurance, copayments and deductibles. You must earn less than 250 percent of FPL in order to be eligible.
The amount of your subsidy is determined by the cost of the second least expensive silver plan on the exchange in your area as a percentage of income. Depending on your income level, the subsidy will cover the difference between the actual premium cost and the percentage of income it exceeds.
Different: Provider Networks
If you don’t qualify for assistance, individual coverage on the exchange will cost just about as much as a health plan off the exchange. An advantage of this coverage is that provider networks haven’t been slimmed down to make plans more affordable, as they have for the marketplace. This means you’re not limited to a select few providers, but if you live in an area with less people and less doctors to begin with, it may not matter.
If your primary care doctor is contracted with several major medical plans on the private market, he or she will not necessarily be a contracted provider on the exchange in your area. It’s worthwhile to check with your doctor before you enroll in a plan, just to make sure you don’t have to switch your PCP in order to avoid paying more for a simple office visit.
There may also be more hospitals in-network if you are enrolled in a private plan. If provider selection, or using the same doctor, is important to you, you’ll want to consider whether to enroll in a health plan on or off the exchange.
Same: Coverage Levels and Qualified Health Plans
Qualified health plans (QHPs) are available through exchanges and private plans. A qualified health plan, according to the Affordable Care Act, is one that has an actuarial value of at least 60 percent and covers a minimum of 10 essential health benefit categories. Each QHP is identified by a separate metallic coverage tier including bronze, silver, gold and platinum. Purchasing one of these plans guarantees you will not face a penalty for being uninsured, though you can buy other plans that help you avoid the individual mandate tax, as well.
These are the four tiers of coverage offered by QHPs inside and outside of the marketplace. Cost sharing options have been streamlined so that you know how to shop for insurance a little bit easier, in just four different levels. This also creates consistency so that you know regardless of the carrier, these plans will be offered nationwide.
Plan pays 60% of medical costs, you pay 30%
Higher cost sharing, lower premiums
Plan pays 70% of medical costs, you pay 30%
Affordable mix of reasonable cost sharing and premiums.
Plan pays 80% of medical costs, you pay 20%
Lower coinsurance for a higher rate.
Plan pays 90% of medical costs, you pay 10%
Highest premiums, lowest cost sharing.
Essential Health Benefits
QHPs sold on and off the exchange must include at least ten categories of what the law dubs essential health benefits (EHBs) in order to meet federal standards and help you evade the penalty. These include what the authors of the law considered to be the most important services a major medical plan could offer. Many plans before the ACA included these benefits in their comprehensive policies, but they were often supplemental benefits sold as an add-on (such as maternity) or sometimes not even offered by more than one company in an entire state.
Since the ACA became law, all preventive services have been covered at 100% under most health plans, which is one requirement of QHPs. Other benefit categories include some services that were scarcely covered in the past, such as mental health care. Including EHBs ensures that the wide variety of policyholders can obtain services they need for a reasonable cost. Insurers can choose to include just these ten groups of services or add more as they see fit. Expect that most companies will likely stick to the minimum requirements.
- Preventive and wellness services and chronic disease management
- Maternity and newborn care
- Emergency services
- Ambulatory services
- Rehabilitative and habilitative services and devices
- Mental health and substance-use disorder care
- Pediatric care
- Laboratory services
- Prescription drugs
Same: Out-of-Pocket Limits
The most you will have to pay out-of-pocket on any individual plan is $6,350 for individuals and $12,700 for families under the law. Beginning January 1, 2014, each of these characteristics from maximum out-of-pocket costs to EHBs are shared by plans inside or outside of the state marketplaces.