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Why is my health insurance so expensive?

Keep in mind...
  • The cost of your health insurance can vary for a number of reasons
  • If you purchased a high-deductible plan from the Healthcare Marketplace, it can be expensive because you are responsible for paying the monthly premium, in addition to meeting the deductible cost
  • If your income is too high to qualify for tax credits through the healthcare marketplace, this can also raise the cost of your health insurance
  • If your employer-sponsored health insurance is too expensive, you can still keep your coverage through the healthcare marketplace
  • You will only qualify for tax credits and subsidies through a healthcare marketplace plan if your employer plan would cost more than 9.69 percent of your income even after employer contribution
  • If any type of health insurance costs more than 8 percent of your household income, you qualify for an exemption and do not have to get health insurance or pay the individual mandate fee

Why are high deductible plans expensive?

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Many of the plans available on the healthcare marketplace are high deductible plans, particularly ones that are on the lower level “metal tiers”, such as bronze or silver. Although you may be responsible for a cheaper monthly premium with a bronze plan, you have to meet a high deductible before the coverage kicks in. However, you still have some options to lower costs under these circumstances.

If your employer offers a flexible spending account, you should consider enrolling in it as it can offset some of your healthcare costs.

If you are self-employed or your employer does not offer a flexible spending account, you can purchase a health savings account as an individual.

You should also know that a lot of preventative services are free even under high deductible plans. You can see your primary care provider for your annual wellness visit without having to worry about cost. Additionally, in the event of a health care emergency, you will have catastrophic coverage and you will never owe more than your deductible’s maximum.

Enter your zip code above to compare healthcare coverage costs in your state for free and find a plan that meets your budget and your medical needs.

What is a health insurance deductible?

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A health insurance deductible is different than your health insurance premium or your co-payment and coinsurance. Additionally, not all health insurance plans have health deductible requirements. It is a fixed amount that your insurance company requires you to pay out of your own money before your plan covers any costs.

Once you have met this deductible, your insurance company will pay their share, although you still may be responsible for paying a co-payment or a certain percentage of the costs.

If you have a high deductible, such as $5,000, it can be difficult to meet. In addition to paying your monthly premiums, you are basically paying all of your healthcare costs out of pocket. However, there are some protections in place to ensure that you do not have to pay a truly exorbitant amount.

The annual deductible limit for an individual is $7,150 and $14,300 for a family. If you would like to fund a health savings account, you must be enrolled in a healthcare plan with a deductible higher than $1,300 for an individual and $2,600 for a family in 2017.

What if my income is too high to qualify for tax credits through the healthcare exchange?

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Another reason that your health insurance may be expensive is that your income is too high to qualify for tax credits or savings through the healthcare exchange marketplace. If this is the case, you can still purchase a plan through the Healthcare Marketplace website or you can use a private company, a broker, or an online retailer. You can find out online whether you qualify for tax credits by inputting your estimating income, household size, and the area you live in.

What are Affordable Care Act tax credits and how do they work?

Premium tax credits offered through the Affordable Care Act can be applied directly to your insurance premium to lower your monthly payment on your marketplace plan or you can have it adjusted on your tax returns. Eligibility for tax credits depends on your income.

You must make between 100 percent and 400 percent of the federal poverty level in order to qualify for tax credits. Those percentages equate to an income between $11,770 and $47,080 for a single person and between $24,250 and $97,000 for a family of four.

If your income falls within this range, your monthly premium will be capped at an amount between 2 and 9.5 percent of your income.

Your tax credit amount will also vary and you can decide how much you want to apply directly to your monthly premium amount.

You can look up the exact percentage you will receive based on your income online. If your income is greater than 400 percent of the federal poverty level, then you do not qualify for tax credits and any health insurance plan that your purchase on the healthcare exchange marketplace may be significantly more expensive.

If my employer-sponsored plan is too expensive, can I keep the plan I purchased through the Healthcare Marketplace?

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If you feel that your employer-sponsored healthcare plan is too expensive, you can enroll in a plan through the healthcare marketplace. However, you will only be eligible for subsidies and tax credits through the marketplace if your employer coverage would cost more than 9.69 percent of your income in 2017, even after your employer’s contribution.

If your employee plan costs less than 9.69 percent of your income, you can still enroll in a marketplace plan, but you will not qualify for any tax credits. Under these circumstances, it is more likely that your employer plan will be more affordable. Additionally, this percentage only applies to individual coverage.

If your employer offers coverage for you and your dependents, you are not eligible for cost assistance through the Healthcare Marketplace. If you do qualify for this affordability exemption, you and your employer will both need to fill out forms and submit them, before you can receive any tax credits or subsidies for your marketplace plan.

How do I know if my health insurance is considered unaffordable and what are my options?

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Unfortunately, you may have limited affordable health insurance options. If your employer-based plan costs you more than 8.13 percent of your income, as well as the cheapest Bronze plan available to you on the healthcare marketplace, you do not have to enroll in a health insurance plan at all and you will be exempt from having to pay the individual mandate fine. It is possible that some members of a household will qualify for affordability exemptions, while others will not.

There are cases where a family member would have qualified for cost assistance through the Healthcare Marketplace, but does not since technically they were offered an affordable plan through their employer. This is because the affordability index only calculates employee coverage and not their dependents. This is referred to as the family affordability glitch. This “glitch” happens when your employer-based coverage costs more than 8.13 percent of your household income, but less than 9.69 percent. This is an unfortunate flaw of the system.

Why do I have to pay for my Medicare insurance?

Some people may find themselves paying for their Medicare insurance when they were under the impression that it was a completely free program. Medicare Part A, which is only hospital coverage, is offered for free to those who have worked for a certain amount of time and earned enough tax credits. The length of time you must work and pay taxes, in order to be eligible, is typically equivalent to 10 years.

If you do not qualify based on your work history, you have to pay a monthly premium to enroll in Medicare Part A. In 2017, you must pay $227 a month for Medicare Part A if you or your spouse worked between 7.5 and 10 years or $413 a month if you or your spouse worked less than 7.5 years in the United States.

Everyone has to pay a monthly premium for Medicare Part B, which is coverage for doctor’s visits and medical supplies. If your annual income is below $85,000 for an individual and $170,000 for couples, you will pay $134 a month for Medicare Part B. If your income is higher than this, you may have to pay a higher Medicare Part B premium.

Finding Balance Between Quality and Cost

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There are many reasons that your health insurance may be more expensive than you thought it would be. If you purchased a high-deductible plan on the marketplace, you might not realize how quickly the costs of your premium, deductible, and coinsurance would add up. If this is the case, you may want to consider setting up a Health Savings Account.

Additionally, if you have a higher income, you may have to pay higher premiums for a marketplace plan or for Medicare coverage. If your employer based insurance is too expensive, you may have options to enroll in a marketplace plan and receive subsidies and tax credits.

Click here to compare health insurance quotes for free and find a plan you can afford without sacrificing quality care.

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