Health insurance has long been tied to the workplace, but job loss and employment trends may be challenging the feasibility of this model, especially among millennials.
More than 25 million workers could lose employer-based health insurance due to the COVID-19 recession — a recession that is having a greater impact on millennial employment than on the baby boomers and Generation X.
Yet, even before the pandemic hit, the composition of the workforce was changing with a rise in freelancers, contract workers, self-employed individuals and solopreneurs — a majority of them millennials, individuals born between 1981 and 1996.
If any of the above circumstances apply to you, then you probably need to buy health insurance coverage on your own. The good news is that the market is rife with options.
The Affordable Care Act has made it possible for millennials to buy cost-effective individual health insurance, especially when you qualify for a subsidy. But what if you earn too much to qualify for a subsidy and have financial obligations that make paying full price difficult (e.g., student loan debt)?
You may want to consider other types of coverage such as short-term medical insurance, catastrophic ACA plan, COBRA, Medicaid. Sifting through your options can feel like no small task. We’ll cover some basics to help you get started.
1. Short-Term Health Insurance
Twenty-one percent of millennials say they’ve changed jobs within the past year — more than 3 times the number of non-millennials who report the same. If you fall into this category, whether that change means starting with another employer or launching your own business, then short-term health insurance coverage may be an option.
Why? Short-term medical insurance is insurance designed for temporary health insurance situations, as reflected by its policy length, benefits and premiums.
Short-term medical policies last anywhere from 30 days to 364 days, depending on your personal needs and your state’s laws. During that time, they help pay for medical expenses you don’t see coming — think accidents and unexpected illnesses — with benefits that typically include hospital room and board, emergency care and surgical services.
These plans don’t typically cover preventive care, maternity or pre-existing conditions. However, some new short-term health plans on the market offer a few non-standard benefits such as preventive care visits, immunizations covered at 100%, mammograms and optional supplemental accident insurance.
This is the key reason short-term premiums tend to be lower than those of unsubsidized ACA plans: They are not equal coverage. Short-term health insurance isn’t subject to ACA requirements, which means it won’t include all of the essential health benefits categories and you can be denied coverage based on your health history
Pros and cons of short-term health insurance
- Available year-round — no open enrollment periods.
- Your policy can begin as soon as the next day if your application is approved.
- May include additional non-insurance benefits (e.g., dental and vision discounts, telemedicine).
- Many short-term plans do not have network requirements.
- You may not qualify if you have pre-existing conditions or need ongoing medical care.
- Plans will not include all of the ACA’s essential health benefits (e.g. pregnancy, preventive care, prescription drugs).
- If you qualify for ACA subsidies or Medicaid, those options may be more affordable.
- Short-term health insurance plans are not available in every state.
Not all short-term health insurance coverage duration rules are the same in every state, nor do they always include the same benefits. Compare different plans to see which benefits work best for you, and pay special attention to deductible, coinsurance and copayment as well as premium. Keep in mind that, as with other types of coverage, the lower the premium, the higher the deductible and vice versa.
2. Catastrophic ACA Plans
Catastrophic health insurance offers another way to enroll in coverage with a relatively low monthly premium. These are true worst-case-scenario plans — plans for when you don’t expect to need healthcare but want to have insurance to help pay for it should you wind up at the ER or in the hospital.
Coverage may sound similar to regular ACA plans (e.g., bronze, silver, gold) in that plans must include all of the essential health benefits and are guaranteed issue; however, there are key differences.
Qualifications — Catastrophic plans aren’t available to everyone. You must either be under 30 years old or qualify for a hardship or affordability exemption.
Subsidies — These don’t apply to catastrophic plans. If you qualify for premium tax credits or cost-sharing subsidies, then you should probably consider a regular ACA plan because it may actually cost you less.
Because catastrophic plans are designed to keep your monthly premium as low as possible, they come with very high deductibles. The amount changes every year, but all catastrophic plans for this coverage year come with an $8,150 deductible. For comparison, the deductible was $7,900 in 2019.
Pros and cons of catastrophic health insurance
- Lower monthly premiums.
- Includes the essential health benefits.
- Covers certain preventive services at no cost.
- Covers at least three primary care visits per year before you’ve met your deductible.
- High deductibles — $8,150 for all catastrophic plans in 2020.
- You pay for most routine medical expenses.
- Not everyone qualifies — age and hardship determine eligibility.
- Available during the annual open enrollment period or when you become eligible for a special enrollment period due to a qualifying life event.
Broadly speaking, a catastrophic plan is best for relatively healthy people who don’t anticipate needing healthcare. If you have pre-existing conditions or health concerns that require ongoing care such as regular checkups or prescription medications, then you may want to look into coverage with lower deductibles and out-of-pocket costs.
If you lose your job-based health insurance due to a life event such as getting laid off, losing hours or quitting, then you may be able to continue coverage through COBRA, the Consolidated Omnibus Budget Reconciliation Act.
Because your coverage continues as usual with COBRA, your benefits don’t change, you retain access to the same healthcare providers, and you don’t have to start over with a new deductible. This may be especially important to you if you’ve been receiving ongoing medical care.
On the other hand, COBRA can be expensive. You will likely become responsible for the entire premium (i.e., the portion you were paying as well as the portion your employer had been paying) plus an additional 2% for administrative costs.
It can be helpful to consider how much you would pay toward premium and deductible with a new plan and compare that with what you have paid toward your existing deductible and will continue to pay for coverage under COBRA.
Pros and cons of COBRA
- Coverage and eligibility stay the same.
- You continue to pay toward your existing deductible.
- Cost can be prohibitive.
- If your company closes or goes bankrupt, you could lose your coverage.
You have at least 60 days from a qualifying event to elect COBRA, and coverage can last 18 to 36 months, depending on the qualifying event. Employers are required to provide you with notices regarding your COBRA rights. If you have questions about your COBRA rights, talk to the person in charge of your workplace benefits.
Maybe COBRA is too expensive or not available to you, or perhaps you don’t qualify for short-term health insurance or it doesn’t meet your needs. Medicaid is yet another coverage option to consider, whether you are between jobs or otherwise uninsured.
You may qualify for low-cost or no-cost health insurance through your state’s Medicaid program. Since the ACA took effect, 37 states have expanded their Medicaid programs, making the coverage available to anyone with a household income below 138% of the federal poverty level. Other populations may qualify based on additional criteria set by the state.
In states that have not expanded Medicaid, eligibility criteria varies. Check with your state’s Medicaid program to learn more and see if you qualify.
Medicaid is administered by states according to guidelines set by the federal government. It meets ACA requirements for minimum essential coverage and includes a broad range of benefits such as primary and preventive care, inpatient and outpatient hospital care, mental health, and prenatal and maternal care. States can also include other optional benefits such as prescription drug benefits and physical therapy.
Pros and cons of Medicaid
- Available year-round.
- Low- or no-cost coverage and care.
- Eligibility criteria vary by state.
- Changes to your income may mean you are no longer qualify for coverage.
Due to its cost and comprehensiveness, Medicaid could be the best coverage for you if you qualify. If you can’t get Medicaid and can’t afford Obamacare, short-term health insurance might be the best overall option to consider.
Of course, the options we’ve covered don’t represent all choices that may be available to you. For instance, you may qualify for health insurance through a spouse or, if you’re under age 26, your parents.
Health Insurance Terms to Know
Once you determine which coverage has the benefits you need, you’ll start to narrow down your plan selection. At this point, you’ll want to focus on what you’ll pay for coverage as well as your out-of-pocket costs.
Pay close attention to the following short-term health insurance terms:
Premium — The amount you pay for a health insurance policy. This is often a monthly payment, but it could also be made at other intervals (e.g., quarterly, yearly).
Deductible — How much you will pay out of pocket before your health insurance policy begins to pay its share of covered services.
Not all health insurance benefits are subject to a deductible. For example, an individual major medical plan will cover no-cost preventive services, as specified by the ACA, before your deductible has been met.
Coinsurance — Your share of covered healthcare costs after you meet your deductible. This is typically a fixed percentage that varies by plan benefit.
For example, Let’s say your health plan has a $6,000 annual deductible, which you’ve met, and 25% coinsurance for doctor office visits after you meet that deductible. You visit your primary care physician and incur $200 in medical bills. Your health plan would pay $150, and your provider would bill you for the other $50.
Copayment — A fixed amount that you typically pay when receiving healthcare services. For example, if your plan has a $25 office visit copay, then you would pay $25 when you check-in for your appointment.
The right plan for you will be the plan that best meets your healthcare needs at a cost you can afford.
As your life and career evolve, your healthcare needs and financial situation will change as well. Revisit your health insurance coverage annually. Even if you like the plan you’ve got, it may not be the best match year after year.
Not sure what path to take? Talk with friends and family to see what they’ve done at similar times in their lives. Contact insurers to ask questions about the plans you’re considering, and don’t hesitate to work with a licensed health insurance agent who can help you find plans that suit your personal situation.