Health insurance protects millions of Americans from paying full price for their medical expenses. But buying the right insurance isn’t an easy task for people looking to sign up for an Obamacare plan through the federal health insurance marketplace (Healthcare.gov). This year, the average consumer will have to wade through 30 unique plans from several different insurers to make their choice.
In this guide, we will cover the facts that you need to know when selecting an insurance plan through the federal health care exchange.
What terms should I know before I apply?
Understanding basic health insurance terminology can help you make a more informed decision about your options. These are the common terms you should know.
Health care costs
Monthly premiums. The amount you pay each month for your health insurance.
Deductible. The amount you pay for covered health services before your insurer begins to cover part of your costs.
Out-of-pocket maximum/limit. The highest amount you will pay for covered services in a year.
Co-insurance. Your share of the costs of a covered health care service. This is the percentage you must pay out of pocket after you have met your annual deductible. You pay a specific co-insurance amount until you meet your out-of-pocket maximum.
Co-payment. A fixed amount you pay for a covered medical service, typically when you receive the service or prescription.
How these costs work together. Consider a scenario where you purchase an individual insurance policy with a $368 monthly premium, a $2,000 deductible, 20% co-insurance, and a $5,000 out-of-pocket maximum.
You will pay $4,416 in monthly premiums ($368 every month).
If you receive a $20,000 medical bill, you will pay:
- $2,000 to cover your annual deductible (100% of costs up to $2,000)
- $3,000 in co-insurance (20% of costs over $2,000 deductible until you hit your out-of-pocket maximum of $5,000)
- $0 in medical costs after you hit your out-of-pocket maximum (in this case the additional $15,000 is covered by your insurance)
Total annual cost:
$5,000 to cover medical bills + $4,416 in monthly premiums = $9,416
Metal Levels. The health care exchanges — both federal and state-run exchanges — classify health insurance plans into four metal categories. The levels are bronze, silver, gold, and platinum. Metal categories are based on how you and your plan split the costs of your health care.
Bronze. Bronze plans offer the least amount of estimated coverage. Insurers expect to cover 60% of health care costs of the typical population. These plans feature the lowest monthly premiums, the highest deductibles, and high out-of-pocket maximum expenses.
Silver. Silver plans offer moderate estimated coverage. Insurers expect to cover 70% of health care costs, and plan members cover the remaining 30%. If you qualify for cost-reduction subsidies, you must purchase a silver plan to access this extra savings. In 2014, 67% of people who were eligible for a subsidy chose a silver plan.
Gold. Gold plans offer high levels of estimated coverage. Insurers expect to cover 80% of health care costs, while plan members cover the remaining 20%. These plans feature high monthly premiums, but lower deductibles and out-of-pocket maximums.
Platinum. Platinum plans offer the highest level of protection against unexpected medical costs. Insurers expect to cover 90% of medical costs, and plan members cover the remaining 10%. These plans have the highest monthly premiums and the lowest deductibles and out-of-pocket maximums.
EPO: Exclusive Provider Organization. Medical services are only covered if you go to doctors, specialists, or hospitals in the plan’s network (except in an emergency).
PPO: Preferred Provider Organization. You pay less for medical services if you use the providers in your plan’s network. You may use out-of-network doctors, specialists, or hospitals without a referral. However, there is an additional cost.
POS: Point of Service. You pay less for medical services if you use providers in the health plan’s network. You need a referral from your primary care doctor to see a specialist.
HMO: Health Maintenance Organization. These plans focus on integrated care and focus on prevention. Usually coverage is limited to care from doctors who work for or contract with the HMO. Generally, out-of-network care isn’t covered unless there is an emergency.
Provider Network. Most insurance plans have preferred pricing with a group of health care providers with whom they have contracted to provide services to their members.
PTC: Premium Tax Credit. The federal subsidy for health insurance that helps eligible individuals or families with low or moderate income afford health insurance purchased through a health insurance marketplace.
APTC: Advance Premium Tax Credit. This credit can be taken in advance to offset your monthly premium costs. The subsidy is based on your estimated income and can be taken directly from your insurer when you apply for coverage. You must repay credits if you qualify for a smaller subsidy once taxes have been filed. You can learn more about repayment limitations here.
Cost Reduction Subsidies. If you earn between 100% and 250% of federal poverty line, you may qualify for additional savings. This extra savings reduces your out-of-pocket maximum, and it offers assistance with co-pays and co-insurance.
Individual Mandate (Tax Penalty). If you can afford to purchase health insurance and choose not to, you will be charged an individual shared responsibility payment, in the form of a tax penalty. There are a few qualified exemptions, but if you don’t meet those, you will be fined.
For the 2016 tax year, the individual mandate will be calculated two ways:
- 2.5% of household income (up to the total annual premium for the national average price of the marketplace’s bronze plan)or
- $695 per adult and $347.50 per child (up to $2,085)
You are responsible for the greater of the two.
Catastrophic Plans. People under age 30 or with hardship exemptions may purchase catastrophic health insurance plans. These plans offer very high deductibles (over $6,850) and high out-of-pocket maximums. Catastrophic plans may offer savings above the metal grade plans, but you can’t use a premium tax credit to reduce your monthly cost.
Preventative Care. All health insurance plans purchased through the health care exchange cover some preventative care benefits without additional costs to you. These benefits include wellness visits, vaccines, contraception, and more.
Government Health Plans
Medicaid. A joint federal and state program that provides health coverage to low-income households, some pregnant women, some elderly, and people with disabilities. Medicaid provides a broad level of coverage including preventative care, hospital visits, and more. Some states provide additional benefits as well.
Medicaid Expansion. The Affordable Care Act (ACA) gives each state the choice to expand Medicaid coverage to people earning less than 138% of the federal poverty line. The primary goal of the ACA is reducing the number of uninsured people through both Medicaid and the health insurance marketplace. The Kaiser Family Foundation keeps track of expanded Medicaid coverage by state.
CHIP: Children’s Health Insurance Program. This program was designed to provide coverage to uninsured children who are low income, but above the cutoff for Medicaid eligibility. The federal government has established basic guidelines, but eligibility and the scope of care and services are determined at the state level. Your children may qualify for CHIP even if you purchase an insurance policy through the health care exchange. You can learn about CHIP eligibility through the marketplace or by viewing this table at Medicaid.gov.
Who can buy insurance through a health care exchange?
Since the introduction of the Affordable Care Act (ACA), most Americans can purchase health insurance through a health care exchange. However, incarcerated people and those living outside the United States cannot purchase insurance through the marketplace.
Most long-term, legal immigrants to the United States may purchase insurance. Healthcare.gov maintains a comprehensive list of qualified immigration statuses for purchasing insurance through the marketplace.
Just because you’re eligible to purchase insurance through the health care exchange doesn’t mean it’s the most cost-effective. That’s why it’s important to weigh all available health insurance options.
Will I qualify for a health care subsidy?
One major factor to consider when weighing the options is your expected subsidy. 85% of people who purchased insurance through a health care exchange qualified for a health insurance subsidy. The subsidy, or premium tax credit, brought average monthly premiums down from $396 to $106.
To qualify for a subsidy, you must meet three standards:
- You must not have access to affordable insurance through an employer (including a spouse’s employer).
- Affordable insurance for 2017 is defined as individual coverage through an employer that costs less than 9.69% of your household’s income.
- You can check that your insurance offers minimum value coverage by having your human resources representative fill out this form.
- You must have a household Modified Adjusted Gross Income between 100% and 400% of the federal poverty line.
- You can calculate Modified Adjusted Gross Income using this formula:
Adjusted Gross Income (Form 1040 Line 37) +
Nontaxable Social Security benefits (Form 1040 Line 20a minus Line 20b) +
Tax-exempt interest (Form 1040 Line 8b) +
Foreign earned income and housing expenses for Americans living abroad (Form 2555)
- You can calculate Modified Adjusted Gross Income using this formula:
- You’re not eligible for coverage through Medicaid, Medicare, the Children’s Health Insurance Program (CHIP), or other types of public assistance. Some states have expanded Medicaid to anyone who earns up to 138% of the federal poverty line.
How can I calculate my subsidy?
The easiest way to calculate the subsidy you will receive is to use a subsidy estimator from Healthcare.gov or the Kaiser Family Foundation. Both calculators estimate your subsidy based on the information you provide. They also help you understand what factors affect your subsidy estimations.
Your income, household size, and the cost of premiums in your state factor into your subsidy. Premium tax credits can help reduce the amount that you will spend on monthly premiums to a set percentage of your income. This subsidy can bring the marketplace’s silver plan into the affordable range set by the Affordable Care Act.
The price of your silver plan determines the subsidy you receive, but you can use this same subsidy for other plans as well. For example, if you purchase a gold plan, you will spend no more than 9.56% of your income on premiums.
Below you can see the maximum amount you will spend on insurance premiums based on your income.
For an Individual
|% of Poverty Line (2016)||Income (Based on 2016 Federal Poverty Line)||Max Silver Premiums as a Percent of Income||Max Monthly Silver Plan Premium Cost after Subsidies||Special Notes|
|100%-138%||Lower 48 States:
|2.03%-3.35%||Lower 48 States:
|Check if you qualify for expanded Medicaid.|
|139%-250%||Lower 48 States:
|3.41%-8.18%||Lower 48 States:
|You may qualify for cost-reduction subsidies if you purchase a silver plan.|
|251%-400%||Lower 48 States:
|8.21%-9.66%||Lower 48 States:
|If you earn more than 400% of the poverty line, you will not qualify for subsidies.|
For a Family of Four
|% of Poverty Line (2016)||Income (Based on 2016 Federal Poverty Line)||Max Silver Plan Premiums as a Percent of Income||Max Monthly Silver Plan Premium Cost after Subsidies||Special Notes|
|100%-138%||Lower 48 States:
|2.03%-3.35%||Lower 48 States:
|Children will qualify for CHIP. Check if you qualify for expanded Medicaid.|
|139%-200%||Lower 48 States:
|3.41%-6.41%||Lower 48 States:
|Children in 46 states will qualify for CHIP. You may qualify for extra savings if you purchase a silver plan.|
|201%-250%||Lower 48 States:
|6.45%-8.18%||Lower 48 States:
|In some states, children will qualify for CHIP. You may qualify for extra savings if you purchase a silver plan.|
|251%-400%||Lower 48 States:
|8.21%-9.66%||Lower 48 States:
|In a limited number of states, children qualify for CHIP up to 375% of the poverty line. If you earn more than 400% of the poverty line, you will not qualify for subsidies.|
What circumstances might affect my eligibility for a subsidy?
Your subsidy can change if your circumstances change. It’s important to plan ahead if any of these special circumstances apply to you.
Families with kids. In most states, if you earn less than 200% of the poverty line, your kids will qualify for the Children’s Health Insurance Policy (CHIP). If your children qualify for CHIP, you cannot purchase subsidized insurance for them, but your individual coverage may still be subsidized.
Families where one spouse has work coverage. Some employers only offer health insurance to their employees. Spouses and children cannot get coverage through work. In that case, you can purchase insurance with a subsidy through the marketplace exchange.
Families with expensive employer coverage. If you can purchase family coverage through your or your spouse’s employer, then you will not qualify for subsidies. The tax code states that if an employee can gain individual coverage for himself or herself for less than 9.69% of total household income, then the insurance is considered affordable. Coverage for the family isn’t factored into the affordability calculation.
The so-called “family glitch” traps 2-4 million people and requires them to pay high prices for premiums. If you are caught in this situation, your children may qualify for CHIP. However, uncovered spouses and children must purchase insurance or pay the individual mandate penalty.
Minnesota Senator Al Franken has proposed a Family Coverage Act that may rectify the tax code, but it has not been passed.
Getting married in 2017. If you’re getting married in 2017, your subsidy depends on your combined income. In the months preceding your marriage, your income is one-half of your and your spouse’s combined income. Once you get married, your subsidy is based on your joint income and your qualifying family.
You need to report a marriage to be eligible for a special enrollment period on Healthcare.gov or your state’s insurance exchange.
Getting divorced in 2017. If you get divorced or legally separated in 2017, you must sign up for a new health insurance plan after you separate. Your subsidy will be based on your income and household size at the end of the year. However, you will need to count subsidies received during your marriage differently than subsidies received when you’re legally separated.
For the months you are married, each spouse divides advanced subsidies received to each new household. If spouses cannot agree on a percentage, the default is 50%. If the plan only covered one taxpayer and his or her dependents, then the advanced tax credits apply 100% to that spouse.
Divorce reduces your income, but it also reduces your household size. These factors change your estimated subsidy in opposite directions. Your subsidy changes will depend on the magnitude of each change.
Reporting a divorce makes you eligible for a special enrollment period. When you enroll in a new plan, the exchange website will help you estimate your new subsidy for the remainder of the year.
Giving birth or adopting a child. You have 60 days from the birth or adoption of your child to enroll them in a health care plan. If you miss this window, your child will not have health coverage, and you will pay a penalty. However, if you enroll your child in a timely manner, you can expect your subsidy to increase.
Report the birth or adoption of a child to be eligible for a special enrollment period on Healthcare.gov or your state’s insurance exchange.
Turning 26. If you’re on your parents’ insurance, generally you can stay until you have turned 26, but you should check your plan to be sure. You will have a 60-day special enrollment period to get your own plan from the health care exchange when you turn 26.
You may also be eligible for a special enrollment period from an employer-sponsored health plan. If you fail to have health insurance for more than three months, you will pay a penalty.
Losing employer coverage. If you lose employer-based health coverage, you can either enroll in COBRA or purchase a plan through the health care exchange. Once you enroll in COBRA, you become ineligible to purchase subsidized coverage through the exchange.
You need to report job status changes to be eligible for a special enrollment period on Healthcare.gov or your state’s insurance exchange.
Changes in income. Premium tax credits are based on your annual income. If you increase your income, you will be expected to pay back some or all of the advanced premium you received. If you earn more than 401% of the federal poverty line, all premiums need to be repaid. If you earn less than 400% of the federal poverty line, you may have to pay back $2,500 of advanced premiums per family or $1,250 for individuals.
You need to report income changes to avoid under- or overpaying your premiums throughout the year.
Moving. Most insurance plans that you purchase through the marketplace are state and county specific. If you move, you need to report the move through the insurance exchange.
Moving may affect your subsidy (if you move to or from Alaska or Hawaii), but it does affect the plans available to you.
How do I apply for insurance?
Applying for insurance takes 30-60 minutes if you have all the necessary information ahead of time. This is what you should gather before you apply:
- Names, birthdates, and Social Security numbers for all members of the household
- Document numbers for anyone with legal immigration status
- Information about employer-sponsored health plans
- Tax return from previous year (to help predict income)
- Student loan documents
- Alimony documents
- Retirement plan documents
- Health Savings Account documents
The website interface for the federal exchange is simple, but answering the questions may be confusing. It’s important to fill out the application as accurately as possible so you can enroll in the best health insurance plan for you.
We’ve done our best to clarify the confusing portions in our step-by-step process below.
A note on state-run health care exchanges
Each state has the right to choose whether to run their own health care exchange, or to use Healthcare.gov, the federally run exchange. Seventeen states run their own health insurance exchanges.
The state-run exchanges perform the same functions as the federally run exchange. They allow you to estimate your tax credit and to purchase insurance. As a consumer, you must provide the same information to your state as you would on the federal exchange.
While the online user experience will vary when states adopt their own online marketplace, the Affordable Care Act is a federal law and a federal program. This means that the requirements and benefits do not change from state to state even if the exchange platform changes. If you have trouble navigating either the state or federally run health care exchange, you can get free help from knowledgeable experts.
Family and Household Info
Start the application by filling out contact information and basic information about members of your household. Even if a member of your family will not need coverage, include them in your application.
The website will help you determine if a member of your household has insurance options outside of the health care exchange. It will also help you determine if a person is a dependent. For the purpose of the health care exchange, your family includes all the people included on your income tax filing.
You need to know Social Security numbers, birthdates, immigration status, disability status, and whether each household member can purchase health insurance through an employer plan.
Income and Deductions
Next, you’ll estimate your income for the upcoming year. Include all the following forms of income:
- Self-employment income (net)
- Social Security benefits
- Unemployment income
- Retirement income
- Capital gains
- Investment income
- Rental/royalty income
- Farming and fishing income
- Alimony received
Afterward, you’ll enter deductions. The application calls out student loan interest and alimony paid, but you should estimate all “above the line deductions” that should be included. These include:
- Retirement plan contributions: 401(k), 403(b), 457, TSP, SEP-IRA, simple IRA, traditional IRA
- Contributions to a Health Savings Account
- Self-employed health insurance premiums
- Tuition and fees paid
- Educator expenses (up to $250 per teacher)
- Half self-employment tax
- Moving expenses
- Early withdrawal penalties from a 1099-INT
Do not double-count income or deductions since you’ll fill out these forms for each person. If you make a mistake, you can edit it when you review your household summary.
Finally, you’ll fill out a few other miscellaneous details that will allow the application to confirm that you are eligible for subsidies or marketplace insurance.
It’s especially important that you have accurate information about job-related coverage for you and your family. This information will determine your eligibility for subsidies and other government programs.
After you complete the application, you can review and submit it. At this point, the system will suggest which members of your household should complete CHIP or Medicaid applications. The remaining family members can enroll in a health insurance plan.
How do I decide what plan type is best for me?
Before you choose a plan, you’ll decide whether to receive advanced or deferred subsidies. Most people with predictable income and household size should take most or all of the subsidy upfront. However, if you expect to undergo a major life change (such as an increase in income, a marriage, or a divorce), consider taking less of your subsidy in advance.
Then you can look for a plan. For people shopping for 2017 coverage, the average number of plans available is 30. Rather than comparing every plan, we recommend creating criteria around the following variables:
- Monthly cost. Consider how the monthly premium will affect your budget. This does not mean you should choose the plan with the lowest premiums, but you should consider the price. People without chronic conditions who have adequate emergency savings may consider opting for low monthly premiums.
- Deductible and co-insurance. Do you have the emergency fund or income you need to cover a small medical emergency? A broken arm, stitches, or an unexpected infection can lead to hundreds of dollars in medical costs. If you have a high-deductible plan, you’ll need to cover these costs without help from the insurance company. If possible, choose a plan with a deductible that you could comfortably cover out of your savings or income.
- Maximum yearly cost. Add the annual cost of your premiums plus your out-of-pocket maximum to determine your maximum yearly cost. In a worst-case scenario, this is the amount you will pay out of pocket. People with chronic conditions that require heavy out-of-pocket fees should try to limit their maximum yearly cost. A plan with a higher maximum yearly cost may represent a higher risk.
- Services and amenities. All insurance plans from the marketplace cover the same essential health benefits, but some plans will offer unique services such as medical management programs, vision, or dental coverage. High-deductible health plans allow you to contribute to a tax-advantaged Health Savings Account.
- Network of providers. It’s important to be sure that your preferred medical providers contract with the plan you choose. Not every doctor is “in network” with every insurance plan. You can check each plan’s provider directory before you choose the plan.
Once you determine your criteria, look for plans that fit your needs and ignore the rest.
Using the exchange website, you can filter and sort plans based on these factors. Most people need to balance cost and coverage to find a plan that works for them.
Where do I get help for free?
Due to the complex nature of the marketplace exchange, the exchange provides marketplace navigators. Marketplace navigators are professionals who provide free, unbiased help to consumers who want help filling out eligibility forms and choosing plans. You can find local marketplace navigators through the health care exchange website. Most of the time you can find someone who speaks your language to meet you in person.
Outside of the exchange, nonprofit organizations are working to help people gain coverage by teaching them about their insurance options. Enroll America offers free expert assistance to anyone who makes an appointment with in-person application assistance. You can use the connector below to make an appointment with one of their experts.
Insurance brokers can offer another form of help. Brokers aim to make it easier for consumers to apply for and compare insurance plans. Insurance brokers have relationships with some or all of the insurance companies on the marketplace. Using a broker will not increase the price you pay for a plan, and it will not affect your subsidies. However, online brokers may not have 100% accuracy regarding a plan’s details. It’s important to visit a plan’s website before you enroll in a plan.
If you want to work with a broker, consider some of these top online brokers. PolicyGenius compares all the plans that meet criteria that you establish, and they serve up the top two plans that meet those criteria. HealthInsurance.com makes applications quick and easy, and the site specializes in special enrollment help.
What happens if I don’t apply for insurance?
In most cases, you must enroll in health insurance or you’ll have to pay a penalty.
The penalty for 2017 hasn’t yet been released, but the 2016 penalty was calculated as the greater of 2.5% of your income (up to the national average cost of a bronze plan) or $695 per adult and $347.50 per child (up to $2,085). This steep penalty means that most people will be better off purchasing some health insurance.
However, under certain circumstances you can avoid buying insurance and dodge paying the penalty. These are a few of the most common exemptions:
- Member of a qualifying health care cost-sharing ministry (501(c)(3) whose members share a common set of ethical or religious beliefs and have shared medical expenses in accordance with those beliefs continuously since at least December 31, 1999.
- Low income, no filing requirement: If you do not earn enough income to file taxes, then you are automatically exempt from paying a noncoverage penalty.
- Coverage is unaffordable. For 2017, if you cannot obtain individual employer coverage or a bronze plan for less than 9.69% of your income (after applicable subsidies), you may opt out of coverage.
- Joint individual coverage is unaffordable. For 2017, if you and your spouse combined cannot obtain individual employer coverage or a bronze plan for less than 9.69% of your income (after applicable subsidies), you may opt out of coverage.
- Short coverage gap (you went without insurance for less than three months).
- Lived abroad for at least 330 days.
- General hardships such as homelessness, eviction, foreclosure, unpaid medical bills, domestic violence, and more (exemption must be granted through a marketplace exemption).
- Unable to obtain Medicaid because your state didn’t expand Medicaid (exemption must be granted through the marketplace).
- Received AmeriCorps coverage (exemption must be granted through the marketplace).
- Members of qualified religious sects who do not obtain government benefits (exemption must be granted through the marketplace).
Although you will not pay a penalty, you may still want to seek out catastrophe insurance or some other insurance to help you deal with high potential health costs.
What happens if my plan was canceled?
Recently, some insurers dropped their insurance plans from the health care exchange. As a consumer, you cannot assume that the plan you chose in the past will be around next year. Unlike previous years, you will not qualify for an exemption if your plan dropped in 2017. This means that you may need to purchase new insurance or pay a penalty.
Even if your plan remains in place, important variables like the deductible, the premiums, or the coverage may have changed.
Whether you’re shopping for a new plan, or reviewing an old plan, take these steps before open enrollment ends.
- Update your personal information on your application. Your income, household size, where you live, and more will affect plan and subsidy eligibility. It’s important to keep your application up to date. The plan that fit you last year may no longer be appropriate, but you won’t know unless you keep the information current.
- Review your plan before you re-enroll. You should receive a notification in the mail if your plan has been changed or canceled. Take the time to understand if the changes affect you.
- Compare plans that fit your needs. Consider enlisting free help from a health care navigator, a nonprofit, or a broker to help you decide.
- Choose the plan that best fits your needs and your budget.
Work to make the most informed decision possible
Choosing a health plan seems like a daunting task, but you can get all the help and information you need to make an informed decision. Your health and your pocketbook matter, and we want to help you protect both.