More and more employers today are adopting reimbursement models for their employees’ healthcare, empowering employees to choose their own individual health insurance plan and get reimbursed, tax-free, for their premium.
While this freedom is great for your healthcare, it can be daunting to shop for your own insurance plan if you’ve never done it before. While there are several ways to go about shopping for health insurance, the most common way is through the Health Insurance Marketplaces.
In this article, we’ll walk you through the five-step process so you can choose the right plan for you and your family.
Step 1: Go to healthcare.gov, or your state's individual Health Insurance Marketplace website
After the Affordable Care Act (ACA) was passed, the online Health Insurance Marketplaces were created to help Americans sign up for their own individual health insurance. Usually, you’ll only be able to sign up for a plan during open enrollment period at the end of the year.
However, if your employer just offered you a reimbursement plan, like a health reimbursement arrangement (HRA), then you qualify for a special enrollment period that allows you to shop for a plan outside of the normal enrollment period.
Step 2: Complete the online application
The website will walk you through several questions to help determine your age, financial status, and location.
You can expect to provide the following information:
- Date of birth
- Social security number
- Tax filing status*
- Number of dependents*
- Current job and income information*
- Other income information such as pensions, rental income, alimony received, unemployment income, etc.*
- Current insurance information, if applicable, such as how you are insured (employer, Medicaid, individual health insurance, etc.)*
- Payment information, such as a credit card or bank draft (ACH) information
*These questions will only be asked if you are applying for federal assistance (premium tax credits, cost-sharing, Medicaid, CHIP, etc).
Aside from your tobacco use, there won’t be any questions about your medical history. The ACA has mandated that no one will ever be charged more for insurance because of their health, so there’s no need to worry about having any medical records on hand. All in all, the application should take you between 15 and 30 minutes.
The questions in this step will help you decide if you qualify for premium tax credits (PTCs). If you have a qualified small employer HRA (QSEHRA) or individual coverage HRA (ICHRA), you have a few options on how to coordinate your premium tax credit and your HRA.
Let’s look at QSEHRA first. A QSEHRA can be coordinated with your PTC, however, you must subtract your QSEHRA allowance from your PTC amount to see if you can take advantage of any tax credits. For example, if your application says you qualify for $200 in PTC each month and you have a $400 monthly QSEHRA allowance, the application will prompt you to manually adjust your PTC amount, which you would adjust to $0 since your QSEHRA allowance is higher than your PTC.
If you qualify for a $400 PTC and your QSEHRA allowance is $300, then you should manually adjust your PTC amount to $100 in your application. Be on the lookout for where to enter this information as questions in the application process tend to move around year to year. This information is important to note as you may be subject to tax penalties when you file your taxes if you use a PTC and don’t adjust for your QSEHRA allowance during the application process.
If you are taking advantage of a PTC, the application process may ask you to submit additional documentation by a deadline date that may include income verification for your entire household, so be aware that your final PTC will depend on submitting this information.
With an ICHRA, you can’t take advantage of a PTC and participate in an ICHRA. If you allowance is considered affordable, you must participate in the ICHRA because you will be ineligible for a PTC. If your ICHRA is not considered affordable, you can choose to opt-out of the ICHRA and collect your PTC, or opt-in to your ICHRA if it offers you more money than your PTC.
Step 3: Choose a plan
Once you’ve filled out your application, you’re ready to choose a plan. The website will display all the available plan options within four metallic tiers: Bronze, Silver, Gold, and Platinum.
A Bronze plan will generally cost the least monthly, but you'll pay more when you receive medical care. This could be a good option if you don't plan on needing a lot of medical services, but want coverage if you’re in an accident.
On the other end, a Platinum plan will generally cost the most monthly, but you'll pay the least when you receive medical care. This could be a good option if you have a lot of medical needs or visit your doctor often.
It’s important to note that these metal tiers have nothing to do with the quality of care you’ll receive. They simply determine how you and your insurance company will split the costs of your healthcare.
If you’re worried about choosing a plan on your own, healthcare.gov has a number you can call to talk with a professional for free.
Step 4: Pay your first premium
All plans are “guaranteed-issue,” which means all individuals are accepted no matter what, so you won’t need to wait and see if your plan is accepted or not. Once you’ve selected a plan, the Marketplace will simply bill you for your portion of the premium and forward the payment to your new insurance carrier.
Once purchased, the plan is yours. Even if you leave your current job, your plan will stay with you since it’s not tied to your employment.
Step 5: Submit your premium for reimbursement
This last step is optional, but important if your employer offers an HRA. If you have an HRA allowance from your employer, you’ll likely be able to get a tax-free reimbursement on your premium.
All you need to do is submit documentation to your employer that shows the following:
- The premium amount
- The coverage date
- The insurance provider
After your employer reviews and approves the documentation, you’ll automatically get reimbursed every month up to your allowance amount. If your premium is more than your monthly allowance, then you’ll simply pay what’s left out of pocket.
Through the Health Insurance Marketplaces, it’s easier than ever to find an affordable plan that meets your unique healthcare needs. Even better, if your employer offers an HRA, you’ll pay even less out of pocket for your monthly premium, maybe even nothing at all!