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Paying for healthcare: What you need to know

At a glance:

  • Why health insurance is important to your finances

  • How to know if you qualify for medical assistance

  • How to choose a health insurance plan

  • How the ACA works

  • Buying health insurance on the exchanges

  • Summary of paying for healthcare

  • Practical ideas you can start with today

Staying healthy is an important goal for many.

There are many ways to maintain good health, including eating a balanced diet, exercising, getting regular checkups and taking medications prescribed by doctors. These habits can lead to a longer life in which to enjoy your family, work and hobbies.

Sometimes, an unexpected health issue comes up, which could result in a visit to the emergency room, medical tests or even surgery.

Chronic health conditions such as diabetes and heart disease require regular monitoring by doctors and may involve taking daily medications.

Whether you are a healthy person or have some health problems, healthcare does cost money, which is why it's a good idea to be aware of the expenses involved and plan for them.

It’s important to learn about the different types of health insurance, why it's important to have insurance, the Affordable Care Act (ACA), and the government health insurance exchanges.

Being healthy can help keep down health care costs. (Graphic: David Foster/Cashay)
Being healthy can help keep down health care costs. (Graphic: David Foster/Cashay)

Why health insurance is important to your finances

Having a health insurance policy is an important way to keep medical bills from eating up a large part of your budget.

Not only can medical bills bust the most carefully prepared budget, but they are also a leading cause of bankruptcy, according to NerdWallet Health.

Costs of going without insurance

The lack of health insurance is one of the major reasons why many Americans rack up high healthcare bills.

Just one visit to an emergency room for a person with no insurance is likely to cost 40% more than a month's rent, according to the National Institutes of Health. If you don't have health insurance, there is a higher chance that you will have to pay more for healthcare. This can contribute to financial stress. Such stress can lead to a bad credit report, a lower credit score, and even divorce.

Unexpected benefits of health insurance

Health insurance has many benefits besides covering the costs of medical bills.

The ACA requires that most health insurance plans offer preventive care for free. This free care includes immunizations and well child checkups for children and mammograms for women over 40. Because insurance companies negotiate steep discounts for healthcare from doctors and hospitals, paying for healthcare without a health insurance policy can be very expensive.

Ultimate costs to you and society

Going without health insurance is expensive for you and your loved ones and society as a whole.

A lack of health insurance may lead you to avoid getting needed healthcare for yourself and your family. That may cost you more later, as an untreated health condition may cause a future visit to the emergency room. Unpaid medical bills and the lack of insurance increases costs for those who do have insurance and has caused some hospitals to go out of business.

How to know if you qualify for medical assistance

Medical Assistance, or Medicaid, is a government health program for low-income individuals, families and children.

The Obama administration shared that there were 65 million Americans covered by Medicaid.

Medicaid is a type of insurance that covers hospitalization, prescription drugs, doctor's visits, vaccinations, glasses, and many other healthcare services. It is a federal program that is administered by individual states. To sign up, contact the local Department of Public Welfare or Medicaid office in your community.

Medicaid eligibility

The standards to qualify for Medicaid vary from state to state and depend on several factors.

These include your income, marital status, number of dependents in your household, and the health issues of you and your family members. Income eligibility is based on the federal poverty level, which in 2019 is $25,750 for a family of four.

Depending on where you live, you may qualify for Medicaid with more income. Some individuals and families may qualify for Medicaid based on medical conditions or participation in the Supplemental Security Income (SSI) disability program.

Under the ACA, Medicaid has been expanded, but not all states are participating in this expansion. Those states that have expanded Medical Assistance have higher income limits — including $35,535 for a family of four in 2019. Check with your local Medical Assistance office for more information.

Other Medical assistance programs

If your family makes too much money to qualify for either traditional Medicaid or expanded Medicaid, children up to age 19 may be covered under the federal Children's Health Insurance Program (CHIP).

Like Medicaid, CHIP is a federal program that is administered by the states.

Each state sets different income levels for covering children through CHIP. You can have more family income than it takes to qualify for Medicaid and still have your children qualify for CHIP. Depending on where you live, your income could be two to three times more than the federal poverty level.

CHIP programs in some states provide prenatal and hospital delivery care to pregnant women. Benefits under CHIP include coverage for hospitalization, prescription drugs, doctor's visits, medical tests, immunizations and well-child checkups. Some states provide dental coverage for children through the Medicaid expansion.

How to choose a health insurance plan

When it comes to buying health insurance, there are many choices.

Your employer may offer health insurance or you may be able to get it through your spouse's employer. If not, you can buy insurance through an insurance agent or through the state or federal health insurance marketplaces.

Employer-based plans may not have very much flexibility, although larger companies may offer several different plans. Individual policies purchased through an agent or in the health insurance marketplaces offer much more flexibility in terms of the types of coverage. They may be traditional major medical plans or health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Plans with richer benefits and lower deductibles have higher premiums.

Limitations on coverage

Now that the ACA is the law, insurance companies must provide consumers with pre-existing medical conditions with insurance.

The pre-existing coverage rule does not apply to "grandfathered" individual health insurance policies. A grandfathered policy is a policy bought on or before March 23, 2010 that has not been changed to reduce benefits or increase costs to consumers.

Insurance companies cannot terminate coverage unless due to fraud or failure to pay premiums or place limits on essential health benefits such as emergency services, hospitalization, prescription drugs, lab tests and outpatient services.

Insurance companies must provide coverage to consumers with pre-existing health conditions, and that coverage cannot cost more than comparable coverage for someone without that condition. In addition, insurance coverage cannot charge women more than men. Mental health coverage must be included in the essential health benefits provided by insurance companies.

Restrictions on access

Health insurance plans may restrict access to certain doctors, hospitals or labs.

Certain types of insurance policies such as HMOs or PPOs, provide a list of doctors and hospitals within their network that are available for lower co-pays. You can see doctors or receive care at out of network facilities, but you will have to pay a higher co-pay than you would have to pay if you went to in-network providers.

How the ACA works

The ACA was created to address a number of challenges that Americans faced over buying and keeping healthcare coverage.

Many Americans were denied coverage because of pre-existing conditions, and others with chronic healthcare conditions or serious illnesses or diseases ran out of benefits due to yearly or lifetime limits. In addition, millions of Americans were uninsured. They were at risk of financial problems and healthcare difficulties due to that lack of insurance.

The provisions of the Affordable Care Act continue to evolve, and there have been many challenges that have chipped away at its original form, so there will likely continue to be changes as it is implemented during the next several years. The federal health insurance exchange can be accessed at healthcare.gov.

Health insurance standards

Under Obamacare, as the ACA is also known, health insurance policies must offer certain basic benefits. These include:

  • Outpatient care, including doctor's visits

  • Emergency room services

  • Hospitalization, including surgery

  • Maternity and newborn care

  • Lab services

  • Prescription drugs

  • Mental health and substance abuse services, including counseling

  • Rehabilitative services

  • Preventative and wellness services

  • Management of chronic diseases

  • Children's health services

Individual mandate

Beginning in 2014 — but ending at the end of 2018 under the recent tax law — under the individual mandate provision, most individuals needed to have insurance coverage or pay a penalty.

That meant you and your children — and anyone else, such as a relative — whom you claim as a dependent, were required to have health insurance or pay a fine every year. The mandate was designed to ensure that the estimated 40 million Americans who didn't have health insurance got health insurance.

The penalty for not having insurance coverage began in 2014 and increased through 2016. The 2018 Tax Cuts and Jobs Act eliminated the individual mandate as of January 1, 2019.

Dr. Martha Perez examines Maria Lebron in a room at the Community Health of South Florida. (Photo: Joe Raedle/Getty Images)
Dr. Martha Perez examines Maria Lebron in a room at the Community Health of South Florida. (Photo: Joe Raedle/Getty Images)

Insurance Subsidies

Many individuals and families qualify for subsidies that will lower the cost of their health insurance premiums.

Those subsidies depend on your family income and size. The subsidies actually take the form of a tax credit, but they are applied to your premium costs immediately so you will pay the lower costs immediately.

Although most high-earning individuals and families will not be eligible for subsidies, low income and many middle-income families and individuals will be eligible. Subsidies for a family of four in 2019 are available for an income range of $25,750 to $103,000. The lower the income, the higher the subsidy; the income ranges will adjust slightly for inflation in future years.

NOTE: Legislation may change cost-sharing subsidies and coverage provisions.

Buying health insurance on the exchanges

The health insurance exchanges, also known as insurance marketplaces, allow you to comparison shop for medical and dental insurance in a variety of ways.

These include online, over the phone, or through representatives of community healthcare organizations in your community.

The federal government exchange is located at healthcare.gov online or via a toll-free line 24 hours a day, seven days a week at 1-800-318-2596. Many states have their own exchanges; if you live in a state without exchanges, you will use the federal exchange to find health insurance.

Healthcare.gov Website

If you have a computer at home or access to one at work or at a public library, the healthcare.gov Website makes it possible to shop for health insurance and sign up for a plan.

The first step is to create an account, where you provide basic information about yourself and your family. You also provide information about your family income to determine if you are eligible for a subsidy that will help pay part of your monthly health insurance premium.

Once you've created an account, you can shop for insurance. The Website makes it easy to compare both medical and dental insurance with different levels of coverage and different premium costs. You can also shop for insurance without creating an account, but you cannot enroll yourself or your family without creating an account.

The enrollment process

The enrollment process is fairly simple once you've selected a health insurance policy.

The marketplace where you enrolled — either the federal exchange or a state exchange — automatically sends your application to the insurance company with the policy you selected.

You can either pay the first month's premium immediately online or wait until your insurance company sends you your insurance documents and first month's premium bill. There can be a delay of several weeks between when you enroll and when you receive your documents and bill. If you want to verify your coverage, call the toll-free number provided to you when your enrollment is verified on the exchange site.

Blue Bridge Benefits LLC agent Patricia Sarabia helps customers interested in Obama Care at a kiosk at Compare Foods in Winston-Salem, N.C. (Photo: AP Photo/Gerry Broome)
Blue Bridge Benefits LLC agent Patricia Sarabia helps customers interested in Obama Care at a kiosk at Compare Foods in Winston-Salem, N.C. (Photo: AP Photo/Gerry Broome)

Insurance tiers

Under healthcare reform, insurance companies can offer five types of plans:

  • Bronze

  • Silver

  • Gold

  • Platinum

  • Catastrophic

Every plan must have similar benefits, but costs vary significantly based on which tier you select. Bronze and silver plans cost less per month, but have higher deductibles and co-pays. They involve higher out-of-pocket costs if you need a lot of healthcare in a given year.

If you select a gold or platinum plan, your monthly premiums will be higher, but you will have lower deductibles, co-pays and ultimately will pay less if you consume a lot of healthcare. You have to decide what works best for you — if it makes sense to spend more money to get a better plan or if you'd rather have a lower premium and pay more for care.

Catastrophic plans are bare-bones plans that require you to pay all of your health care costs up to a specific amount, usually several thousands of dollars. They have few other benefits.

If you have a plan with a high deductible, you can open a health savings account. A health savings account allows you to save money before taxes to pay health care costs that aren't covered by your health insurance plan.

NOTE: Legislation may change cost-sharing subsidies and coverage provisions.

Summary of paying for healthcare

This is useful information about the importance of health insurance and how to obtain coverage. Once you've reviewed your healthcare options and decided to get coverage, you'll position yourself for a more financially healthy future.

If you did not have insurance before, your out-of-pocket healthcare expenses will likely decline, and you will have less financial stress in your life.

Now that you understand the importance of health insurance, we'd like to encourage you to look into health insurance for you and your family if you don't already have it.

Practical ideas you can start with today

  • Go to healthcare.gov and look at what options are available for health insurance.

  • Talk to your employer about your healthcare insurance options and find out when open enrollment is.

This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.

Read more information and tips in our Healthcare section

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