How to Cut Your Costs for Marketplace Health Insurance

The Health Insurance Marketplace may be the best place for getting health insurance if you're not covered by an employer, a spouse's or parent's plan, or some other source. And if you're getting by on a low income, browsing the Marketplace for a plan is a must. You may be eligible for extra savings that lower your monthly health insurance bill, deductibles, copayments, and coinsurance.

The Health Insurance Marketplace

If you don't have health insurance through a job, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), or another source, you can buy a plan on the Health Insurance Marketplace. To be eligible to enroll in health coverage through the Marketplace, you must:

• Live in the United States
• Be a U.S. citizen or national (or be lawfully present)
• Not be incarcerated

If you have Medicare coverage, you’re not eligible to use the Marketplace to buy a health or dental plan.

The Marketplace was created as part of the Affordable Care Act (ACA) of 2010, which is colloquially known as Obamacare. Most people can use the federal government's marketplace to apply for and enroll in health insurance. But residents of 17 other states, plus Washington D.C., have set up their own exchanges.

Required Coverage for Marketplace Plans

Marketplace plans guarantee that you will receive a certain minimum level of healthcare, whoever you are and whatever your income level. And as a Marketplace customer, you have certain rights:

1. An insurance company can't deny you coverage or charge you more if you have a pre-existing condition.
2. Preventive care, such as routine checkups and screenings, is covered at 100%, even if you haven't met your deductible yet.

Also, all plans offered on the Marketplace must cover the following essential health benefits:

• Ambulatory patient services
• Breastfeeding coverage
• Care for newborns and children (including dental and vision care)
• Emergency services
• Family planning coverage
• Hospitalization
• Laboratory services
• Mental health and substance use disorder services
• Occupational and physical therapy
• Pregnancy, maternity, and newborn care
• Prescription medications
• Preventive and wellness services and chronic disease management

Preventive services include (but are not limited to):

• Alcohol misuse screening and counseling
• Blood pressure screening
• Cholesterol screening
• Colorectal cancer screening
• Depression screening
• Diabetes (Type 2) screening
• Diet counseling
• HIV screening
• Immunizations
• Mammograms
• Obesity screening

When to Apply for Coverage

You have to shop, apply for, and buy a health insurance plan during the open enrollment period. This period generally falls between November and December.

But you may be eligible for a special enrollment period if you have a qualifying event. That happens if one of the following occurs:

• You lose your existing health coverage, such as from losing your job
• You get married or divorced
• You have a baby or adopt a child
• You move to a different ZIP code or county
• You have a change in income that impacts your insurance coverage
  

Getting Started in the Marketplace

To get started, visit HealthCare.gov or your state's version of it. Either way, you'll get a quick side-by-side comparison of the plans available to you.

The database allows you to choose from four tiers of health insurance: Bronze, Silver, Gold, and Platinum. Bronze plans are the least expensive when it comes to your monthly health insurance bill. However, they have the highest deductibles, copayments, and coinsurance. Platinum plans have the most expensive monthly payments, but the lowest extra costs.

Choosing between these plans can be complicated, so make sure you take your time and read as much as you can about the benefits of the different plans before you make your decision.

During the enrollment process, you'll learn whether you're eligible for the advance premium tax credit or a cost-sharing reduction. You'll find out how much you can save if you qualify. And if you do, you must buy your plan through the Marketplace.

Comparing Health Plans

When you browse the Marketplace, you'll find that your choices come from private health insurance companies, including big names like Blue Cross, Cigna, and UnitedHealthcare. The mix you get depends on where you live. 

Each company offers a range of healthcare plans within the four metallic levels. The levels indicate the rough percentage of costs that the plan will pay toward your healthcare services:

Bronze plans, for example, provide the lowest level of coverage (60%) but have the lowest monthly premiums. As the plan level increases, so do the coverage and your monthly premium.

Even within the same metallic level, you'll still be able to choose from several coverage options. These options affect both your premiums and out-of-pocket costs for deductibles, copayments, and coinsurance. Because the Marketplace allows various private insurers to offer plans, a plan from one company may cost more or less than the same plan offered by a different insurer.

For example, a Silver plan from one company may cost you more upfront for your monthly premium, but your out-of-pocket expenses will be much lower. Conversely, a Silver plan from another insurer could cost less each month, but you'll pay more for healthcare expenses because of the higher deductible, copayment, and coinsurance amounts.

How to Reduce the Costs of Marketplace Insurance

Depending on your modified gross adjusted income (MAGI) and your family size, you may be eligible for the advance premium tax credit or a cost-sharing reduction. Both of these programs will reduce the cost of your healthcare.

Cost-Sharing Reductions

A cost-sharing reduction is a discount available on Silver plans only. This reduction can help lower your out-of-pocket costs for:

• Deductibles: The amount you owe for covered services before health insurance kicks in.
• Copayments: A fixed amount you pay for covered healthcare services.
• Coinsurance: Your share of the costs of covered healthcare service.
• Out-of-Pocket Maximum: The most you'll pay in a year for covered health expenses.

For example, say you visit the doctor and are charged $100. With your particular Silver plan, you normally have a copay of $25. Because you qualify for cost-sharing reductions and choose a Silver plan through the Marketplace, your copay may be as low as $5.

Similarly, if your plan has a $3,500 deductible, it may be lowered to $500 with cost-sharing reductions. Essentially, you pay for a Silver plan, but receive the increased coverage of a higher metallic level plan, reducing your out-of-pocket expenses.

Cost-sharing reductions are available only to the following people:

• People who don't qualify for public coverage such as Medicaid or the CHIP
• People who can't get qualified health insurance through an employer. If your employer offers healthcare insurance, you can't get a cost-sharing reduction.
• People whose incomes fall between 100% and 250% of the federal poverty level (FPL)

Advanced Premium Tax Credit

Many more people qualify for an advance premium tax credit, which lowers your monthly health insurance bill for coverage bought through the Marketplace. With this credit, you can choose any metallic-level plan in the Marketplace.

To be eligible for the advance premium tax credit:

• You must be ineligible for public coverage.
• You must be unable to get qualified health insurance through your employer.
• Your income usually must fall between 100% and 400% of the federal poverty level.

The American Rescue Plan Act gave more people access to this credit for 2021 and 2022. The act also increased the level of support for many who already qualified. Although it was set to expire in January 2023, the availability of this credit was expanded to 2025 with the passage of the Inflation Reduction Act of 2022.

Premium tax credits are sent directly from the government to your health insurer to lower your monthly premium. If you qualify, you can decide how much of the credit to apply to your premium each month (up to 100%).

When you file your annual tax return, you'll reconcile the premium tax credits you received and the actual amount you qualify for based on your final income for that year. If you've taken more payments than you're eligible for, you may have to pay the money back when you file your return. If you should have taken more, however, you may get a refund.

The White House and Advanced Premium Tax Credit

The application of the advance premium tax credit was changed for 2021 and 2022 with the American Rescue Plan Act of 2021 by increasing eligibility for all income brackets for these years. Although set to expire in January 2023, the White House's Inflation Reduction Act extended the availability of the credit until 2025.

Here's how it works:

• Families whose incomes exceed 400% of the FPL can claim these credits.
• No family will pay more than 8.5% of their household income toward the cost of the benchmark or less expensive plan. This means many consumers qualify for higher tax credits to help cover their Marketplace health plan premiums.

People across all household income levels can expect lower premiums as a result of receiving more tax credits to reduce plan prices. In fact, many low-income families and individuals can choose from $0 premium plans after tax credits.

This extension was automatically applied to all plans available through HealthCare.gov starting on April 1, 2021, and it extends through 2025 under the Inflation Reduction Act. This means new consumers and current enrollees who submit an application and select a plan on or after April 1 will receive the increased premium tax credits for Marketplace coverage.

Choosing Catastrophic Coverage

When you fill out an application online, you might see catastrophic plans listed among your plan options. You may be eligible for a catastrophic plan if you're under 30 years old or if you qualify for a hardship exemption because you can't afford health coverage. This is determined during the application process and is based on your family size and income.

A catastrophic health plan covers three primary care visits per year before the deductible is met. It also covers preventive services at no cost to you. The premium you pay each month should be considerably lower than for other plans, but the out-of-pocket costs (deductibles, copayments, and coinsurance) are generally much higher.

If you qualify for and choose a catastrophic plan, you won't be eligible for cost-sharing reductions or premium tax credits. Catastrophic plans cannot be purchased with premium subsidies.

Qualifying for Medicaid

Depending on your income and family size, you may qualify for Medicaid, a program that provides health coverage for eligible people in the following categories:

• Low-income individuals, families, and children
• Pregnant women
• Older people
• People with disabilities

Each state has its own rules about who qualifies for Medicaid. Under the ACA, Medicaid eligibility expanded in many states, and an increased number of people qualified for benefits. If you are eligible, you can get free or low-cost coverage, and you won't need to buy a Marketplace plan.

Many states also have a separate program, called CHIP, which provides health insurance for uninsured children in low-income families who don't qualify for Medicaid but still cannot afford private coverage.

To find out if you are eligible for Medicaid or CHIP benefits, fill out an application on the Health Insurance Marketplace. You can also visit your state's Medicaid website to apply and find out if you qualify.

The Bottom Line

Most individuals and families will be able to compare and buy their health coverage through the Health Insurance Marketplace. 

After you fill out an application online, you can see if you qualify for Medicaid, CHIP, cost-sharing reductions, and/or premium tax credits. You will also find out if you are eligible for a catastrophic plan that charges lower premiums but higher out-of-pocket costs.

To find additional information regarding the Health Insurance Marketplace and extra savings, as well as state-specific information and how to apply in your state:

• Visit HealthCare.gov
• Call 1-800-318-2596
• Contact your current health insurance company