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How to Purchase ACA-Compliant Health Insurance Through the Marketplace

If you’re one of the countless Americans shopping for individual health insurance plans thanks to the Affordable Care Act (ACA), commonly known as Obamacare, for the first time this year, you probably have some questions.

Maybe lots of questions. Common doubts include:

  • Am I eligible for a plan offered on the federal health insurance marketplace or applicable state marketplace?
  • How do I find the right marketplace?
  • If I’m eligible, do I qualify for subsidies to reduce my monthly premiums?
  • How do I navigate what appears to be a complicated and technical application process?
  • What can I expect from the plan I ultimately purchase?

Fortunately, comparing and purchasing health insurance through the marketplace isn’t rocket science. Most applicants complete the process by themselves in less than an hour. And if you get stuck, help is just a phone call or email away.

Ready to take the next step in your individual health insurance journey? Start with an overview of the marketplace and its eligibility guidelines.

The ACA’s Health Insurance Marketplace

The marketplace allows eligible consumers to compare and enroll in health insurance plans. All plans must meet specific minimum standards of quality, coverage, and cost.

The marketplace itself is both an insurance application portal and a comparison-shopping tool. It’s there to help you:

  • Apply for and enroll in a qualifying plan quickly by requiring just one application for all marketplace plans
  • Understand the benefits and limitations of available plans
  • Compare the real costs of insurance plans, including copays and deductibles, so you can make an informed decision
  • Learn about any premium subsidies you qualify for

Who’s Eligible for Marketplace Plans?

Most Americans are eligible to purchase marketplace plans, including those eligible for employer-sponsored insurance. Under the law, there are only four ironclad marketplace eligibility requirements:

  • You must live inside the U.S.
  • You must be a U.S. citizen, U.S. national, or otherwise be lawfully present in the U.S.
  • You can’t be eligible for Medicare.
  • You can’t be incarcerated.

Broad eligibility requirements aside, ideal candidates for individual marketplace plans meet one or more of the following criteria:

  • You Have No Employer-Sponsored Health Insurance Option at Your Full-Time Job. If your employer doesn’t offer health insurance and you’re not eligible for Medicare, Medicaid, or another government-sponsored program that provides low-cost health insurance coverage, the marketplace is meant for you.
  • You Don’t Want to Join Your Employer’s Plan. If your employer does offer health insurance coverage, you’re free to decline it for any reason (related to cost, coverage, or anything else) and search for a marketplace plan instead. However, you’re unlikely to qualify for income-based premium subsidies on your chosen plan. The only exception is if your employer’s plan doesn’t meet federal standards for affordability (meaning the employee’s share of premiums is no more than 9.83% of household income in 2021) and minimum value (meaning the plan pays for at least 60% on average of covered health care expenses).
  • You Work Part-Time With No Health Benefits. While some employers extend health insurance benefits to part-time workers, many don’t. If your employer doesn’t, it’s probably easier for you to find an individual plan on the marketplace than to find a different job.
  • You’re Self-Employed. Because they’re both the employee and employer, the self-employed must provide their own insurance.
  • You’re Not Currently Employed. The marketplace makes it easier for the unemployed to get health insurance. If you’re currently unemployed and don’t have coverage through your former employer (either through a severance agreement or COBRA, which tends to be very expensive), you’re a good candidate for marketplace coverage.
  • You’re Not Eligible for Coverage Under a Parent’s Plan. The ACA permits young people to remain on their parents’ insurance plans until age 26. If you’re 25 or under, coverage under a parental plan might be more affordable than a marketplace plan, even with subsidies.

Which States Mandate Health Insurance?

As originally written, the ACA mandated health insurance coverage for all Americans, including those not covered by government-run or employer-based insurance plans. Americans who chose not to purchase health insurance had to pay an income tax penalty each year.

Following the passage of the Tax Cuts and Jobs Act of 2017, which eliminated the tax penalty on those without health insurance, it’s no longer the case that all Americans must have health insurance. But millions of Americans are still bound by state laws mandating coverage.

According to HealthCare.com (a private informational site not to be confused with the marketplace’s government-run HealthCare.gov), several states currently require individuals to purchase health insurance:

  • California
  • District of Columbia
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Vermont

Other states may choose to implement an individual mandate with or without a tax penalty in the future. For the latest information about what’s required in your home state, refer to the National Conference of State Legislatures’ guide to state-level health insurance mandates and protections.

How Does the Employer Mandate Affect Consumers?

Unlike the individual mandate penalty, the employer mandate penalties remain in effect. That means that if you work for an employer with 50 or more full-time employees, you’re entitled to employer-provided ACA-compliant health care coverage, or your employer can face stiff financial penalties.

Qualifying employer-based health plans must meet three criteria:

  1. Minimum Essential Coverage. Also sometimes called “qualifying health coverage,” minimum essential coverage is any insurance plan that meets the ACA’s minimum requirements. Employers must offer minimum essential coverage to at least 95% of full-time employees.
  2. Minimum Value. The plan must pay at least 60% of the costs of benefits.
  3. Affordable Coverage. A covered employee’s required plan contribution can’t exceed 9.83% of the employee’s household income.

Some employers’ health insurance coverage fails to meet one or more of these criteria. If yours is one of them, you can forgo employer-based coverage and purchase individual health insurance through the marketplace without running afoul of the law or inviting reprisal by your employer. In these cases, you remain eligible for premium subsidies (depending on your income) as well.


Subsidies for Marketplace Plans

Most American consumers qualify for tax credits that cover part or all the cost of premiums charged by marketplace plans. According to the Center on Budget and Policy Priorities, more than 3 in 5 Americans with individual marketplace plans receive financial help.

You can choose to apply health insurance premium subsidies at the end of the year, reducing your federal income tax burden when you file, or on a rolling basis, reducing your net premium cost each month. This second option is useful for freelancers and solopreneurs, whose income is more likely to change significantly from month to month.

Workers with irregular incomes, such as independent contractors, have additional flexibility at their disposal as well. Those anticipating a significant year-over-year increase in income can voluntarily take lower subsidies to avoid potentially hefty tax penalties for subsidies they didn’t actually qualify for. Plan holders can even change their subsidy amounts midyear in response to income changes. HealthCare.gov recommends affected plan holders do so as soon as possible.

Premium subsidies don’t apply to supplemental coverage, like accident supplements or adult dental and vision plans. Even absent midyear changes, expect your subsidy to change each year as your income and plan costs fluctuate. There are two types of subsidies.

1. Premium Tax Credits

If you meet the requirements to receive a premium tax credit and enroll on a federal or state marketplace, the credit will lower the cost of your health insurance premium. For instance, instead of paying $400 per month for coverage, your premium tax credit might reduce your monthly payment to $200.

The premium tax credit is available to people earning an annual income between 100% and 400% of the federal poverty level based on household size. This credit does not have a fixed value. Instead, the dollar amount of the credit you receive varies depending on factors like your household size and annual income: the lower the income, the greater the subsidy.

2. Cost-Sharing Reductions

Cost-sharing reductions make health insurance more affordable by reducing the cost of out-of-pocket expenses for consumers who purchase silver plans (and silver plans only) in the marketplace. These out-of-pocket expenses include deductibles, coinsurance, or copays that qualify as in-network services covered by the applicable plan.

Silver plan holders earning between 100% and 250% of the federal poverty level qualify for cost-sharing reductions. If you qualify, any silver plan for which you’re eligible should automatically factor your cost-sharing reductions into the price calculations you see.


Characteristics of Marketplace Plans

Per HealthCare.gov, all plans offered in the Health Insurance Marketplace must provide the following guarantees:

  • Coverage for Preexisting Conditions. ACA-compliant plans must guarantee coverage for individuals with preexisting conditions, including pregnancy, and can’t deny coverage or raise rates after enrollment based on health factors alone. This protection also extends to two government-run health care programs: Medicaid and the Children’s Health Insurance Program (commonly known as CHIP).
  • Free In-Network Preventive Care Services. These services include routine vaccinations and health screenings supervised by in-network providers.
  • Expanded Coverage Options for Children, Students, and Young Adults. The expansion includes permitting young adults to remain covered under parental health insurance plans until age 26.
  • No Annual or Lifetime Coverage Caps. ACA-compliant plan sponsors can’t set annual or lifetime caps on what they’ll pay for covered health care services, regardless of the plan holder’s underlying condition or prognosis.
  • Consumer-Friendly Changes to Plan Language. ACA-compliant individual plans and employer-sponsored plans must provide applicants with plain-language summaries of benefits and terms and a “universal glossary” that defines commonly encountered terms related to health care and health insurance.
  • Consumer-Friendly Changes to Insurance Rates and Disclosures. ACA-compliant plan sponsors must publicly explain premium increases greater than 15% and (with some exceptions) spend at least 80% of premiums on health care expenses and quality-improvement initiatives.
  • Prohibition on Frivolous Cancellations. The ACA forbids insurance companies from retroactively canceling health insurance policies or refusing to pay pending claims due to honest mistakes made during the application process. This protection does not prevent insurance companies from canceling policies in documented cases of fraud, however.
  • Mandated Doctor Choice and Emergency Room Access. The ACA requires compliant plans to allow plan holders to choose in-network primary care providers and permit access to out-of-network emergency rooms without requiring higher copays or coinsurance payments. ACA-compliant plans must also permit specialist OB-GYN services with or without a referral.
  • Protections Against Employer Retaliation. The ACA prohibits employers from firing or otherwise retaliating against employees for taking certain protected actions, including obtaining a premium subsidy on a marketplace plan.

Additionally, all marketplace plans must provide 10 essential health benefits:

  1. Ambulatory (outpatient) patient services
  2. Emergency services
  3. Hospitalization, including surgery and overnight care
  4. Pregnancy, maternity, and newborn care, both prenatal and postnatal
  5. Mental health and substance use disorder services, including behavioral health treatment
  6. Prescription drugs
  7. Rehabilitative and habilitative services and devices for people with injuries, disabilities, or chronic conditions
  8. Laboratory services
  9. Preventive and wellness services and management of chronic diseases, such as diabetes
  10. Pediatric services, including dental and vision care (which aren’t considered essential for adults)

These protections and guarantees apply to three distinct types of marketplace plans: the regular “metal” plans (bronze, silver, gold, and platinum), catastrophic plans, and high-deductible health plans. Unsubsidized dental and vision plans may also be available through the marketplace, though selection can be thin or nonexistent in some areas.

Metal Plans

Metal marketplace plans come in four categories denoted by tiers with metallic names. Each tier’s distinguishing feature is the rough average paid out of pocket by plan holders up to the annual cost cap:

  • Bronze: Plan holder pays 40% of health care expenses; insurer pays 60%
  • Silver: Plan holder pays 30% of health care expenses; insurer pays 70%
  • Gold: Plan holder pays 20% of health care expenses; insurer pays 80%
  • Platinum: Plan holder pays 10% of health care expenses; insurer pays 90%

In sum, premiums are highest and coverage most generous at the platinum tier. Premiums are lower and coverage least generous at the bronze tier. Note that the out-of-pocket-to-insurer responsibility split has no bearing on quality of care, which depends on provider quality.

Catastrophic Plans

The second type of marketplace plan is the catastrophic plan. Catastrophic plans have very low premiums and very high deductibles relative to the metal plans, so they’re appropriate for those in excellent health (and others who don’t expect to incur significant out-of-pocket health care expenses).

By law, eligibility is limited to just two classes of consumer:

  1. Anyone under age 30
  2. Applicants of any age who qualify for a hardship or affordability exemption based on an inability to afford available employer-sponsored or marketplace plans

High-Deductible Health Plans

The final type of marketplace plan is the high-deductible health plan (HDHP).

HDHPs have lower premiums and higher deductibles than the four metal plan types, so they’re most suitable for relatively healthy consumers who don’t expect to incur significant out-of-pocket health care expenses. The minimum HDHP deductible is $1,400 for individual plans and $2,800 for family plans. The maximum annual out-of-pocket HDHP cost is $6,900 for individual plans and $13,800 for family plans.

Every HDHP plan holder is eligible to open, fund, and regularly contribute to a health savings account (HSA), a tax-advantaged account designed to defray out-of-pocket health care expenses. Funds held in HSAs roll over indefinitely, and you can withdraw funds without penalty for any reason after age 65. But income taxes may still apply on balances not withdrawn to cover qualifying health care expenses.

Per IRS regulations, HSA eligibility is limited only to individuals with qualifying HDHPs — not metal or catastrophic plans.


Applying for Health Insurance Marketplace Coverage

Most people apply for marketplace coverage during the annual open enrollment period that runs from Nov. 1 through Dec. 15. If you plan to take advantage of the open enrollment period, complete your application for coverage and select a plan during this window.

That said, those experiencing certain life events may qualify to apply for coverage outside the open enrollment period during a 60-day special enrollment period that begins on the date of the qualifying event. Common special enrollment events include:

  • Household Changes. Eligible household changes include getting married; welcoming the birth, adoption, or foster placement of a child; getting divorced or legally separated; or the death of a family member that renders you ineligible for your current health insurance plan.
  • Residential Changes. These include moves within the U.S. and from a foreign country into the U.S. Even local moves count: Any change of address that puts you in a new zip code qualifies for special enrollment.
  • Qualifying Loss of Coverage. A qualifying loss of coverage means you or anyone in your household lost qualifying health coverage within the past 60 days or expects to lose coverage within the next 60 days.

Whether you apply during open enrollment or a special period, applying for coverage is a relatively straightforward process. You can apply for coverage for yourself, your spouse or domestic partner, and any qualifying dependents using the same application. You just need to provide relevant personal and work-related information (if applicable) for each of them.

4 Ways to Apply for Marketplace Insurance

When you’re ready to apply, choose one of these methods:

  1. Apply Through the Appropriate Marketplace Portal. Visit HealthCare.gov or your state’s health insurance marketplace (exchange) to compare plans and apply online. About 15 states have their own exchanges (the remainder use the federal exchange). Check HealthCare.gov’s list of state exchanges to find out where to apply.
  2. Use an Approved Broker or Assister. If you need help navigating the application process, check HealthCare.gov’s database of approved local brokers or assisters to find trustworthy help in your area. Brokers and assisters help applicants by email, phone, or in person.
  3. Call the Marketplace Help Line. Trained helpers staff the help line on a 24/7 basis. The number to call is 800-318-2596.
  4. Send in a Paper Application. You’re free to send in a paper application if you’re concerned about security or simply not comfortable applying online. Mailed applications take longer to process and may result in significant delays if there’s an issue with your application.

Information You Need to Apply for Marketplace Insurance

Before you begin your application, gather all the information you need to apply for marketplace insurance:

  • Basic information (such as name and date of birth) about everyone in your household
  • Your mailing address
  • Social Security numbers for anyone who needs coverage
  • Immigration documentation for any noncitizens on your application, if applicable
  • Your projected household income for the coming year
  • Detailed employer and income information (pay stubs, W-2 forms, or wage and tax statements)
  • Tax filing status (for example, single vs. married filing jointly or head of household)
  • Current policy numbers for other health insurance plans
  • Information about the professional helping you apply for coverage, if applicable

If you or anyone in your household has or is eligible for employer-sponsored coverage or anyone’s employer provides financial assistance with health care expenses through a health reimbursement arrangement, provide information about those programs as well.

How to Apply for Coverage Through the Federal Marketplace Portal

If your state doesn’t have its own exchange, you can apply for health insurance coverage through the federal marketplace. Follow these steps to complete your application and compare plans:

  1. Preview Plans. If you’re visiting the marketplace outside the open enrollment period, use the plan preview tool to view plans and pricing in your area. Simply enter your zip code and answer a series of questions about yourself and anyone else seeking coverage: age, eligibility for coverage through an employer or other non-marketplace health insurance provider, tobacco use, pregnancy status, dependents (if any), and estimated plan year income for your household. If you don’t want to answer the questions, you can skip ahead to see plans for a 35-year-old in your zip code. But if you answer them, you can receive an accurate estimate of your subsidy eligibility based on your income and household size.
  2. Complete Your Application. You can complete your application for marketplace health insurance during the open enrollment period (or special enrollment period if you qualify). You only need to do this once per year. The application itself is basically a drawn-out version of the preview tool: Using the information you’ve gathered, provide detailed information about yourself and any other individuals in your household for whom you’d like to secure coverage. For details on what to expect, refer to the sample application.
  3. Compare Plans. Finally, you’ll see a detailed list of plans available in your area. Each listing displays the plan’s name and ID number, metal tier, estimated monthly premium after subsidy, deductible and annual out-of-pocket maximum, and copayment and coinsurance information (for services like preventive care and emergency care). Each listing also has a tool for estimating total yearly costs based on the type and amount of services you expect to use, a tool to check whether your preferred medical providers are in the plan’s network, and a tool to check whether the plan covers your prescription medications. Click the plan’s name for even more detail, including plan documents (such as a summary of benefits and provider directory) and cost and coverage examples for common situations (such as a healthy pregnancy or Type 2 diabetes management).

If your state doesn’t use the federal marketplace, your application and plan-comparison experience shouldn’t be radically different from this, but it may vary.


Final Word

Health insurance exists to protect us from the unknown: the unexpected, unpredictable, and perhaps uncontrollable health problems we all face sooner or later.

But it’s all too common for young, healthy folks to question whether they really need health insurance coverage. If money is tight, you’re in good health, and you rarely visit the doctor anyway, what good is it? But what happens when you face an unexpected need for medical care due to an accident, serious illness, or the sudden diagnosis of a chronic health issue?

Don’t wait until you’re on your way to the urgent care clinic or emergency room to protect yourself. Check out the Health Insurance Marketplace, size up your options, and apply now — before it’s too late.

Brian Martucci
Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

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