4 Health Insurance Alternatives to ACA Plans

It’s open enrollment season for 2020 Affordable Care Act (ACA) plans. These individual major medical plans available through the federal and state health insurance exchanges can be an excellent option for those with a household income between 100% and 400% of the federal poverty level or have a pre-existing condition. Others, however, may be looking for alternative insurance options.

While ACA plan premiums may have dropped an average of 4% for 2020, many people who don’t qualify for subsidies have decided that these plans are too expensive for them and are looking elsewhere for healthcare benefits. According to the Centers for Medicare and Medicaid Services, 2.5 million people who didn’t receive federal premium tax credits left the individual market from 2016 to 2018, a 40% drop in 2 years.

Data shows enrollment numbers have, indeed, dipped in recent years.

  • 2019 — 11.4 million
  • 2018 — 11.7 million
  • 2017 — 12.2 million
  • 2016 — 12.6 million 
  • 2015 — 11.6 million
  • 2014 — 8 million 

For the 2020 coverage year, ACA plan rates average nationwide as follows (Kaiser Family Foundation analysis based on rates for a 40-year-old and weighted by county plan selections):

  • Lowest-cost bronze premium — $331.
  • Lowest-cost silver premium — $442.
  • Benchmark (second-lowest-cost silver plan) premium — $462.
  • Lowest-cost gold plan — $501. 

The average advanced premium tax credit for eligible enrollees who use the federal exchange is $519 for 2020 plans, according to CMS. About 88% of federal exchange enrollees were eligible for tax credits in 2019.

If you don’t qualify for a subsidy in 2020 and have to pay full price for an ACA plan, you may already carefully evaluating your options in an attempt to identify the most affordable coverage available to you. There are some alternatives to consider including short-term medical, private health insurance, zero deductible plans or fixed indemnity plans, and faith-based plans. 

1. Short-Term Medical Insurance

Short-term health insurance offers benefits for medical costs related to injury and unexpected illness. Because short-term plans are designed as temporary health insurance coverage for those between major medical plans, it can be a nice option when you’re trying to figure out how to afford permanent coverage. 

Short-term policies are available for as few as 30 days and up to 364 days, depending on your needs and where you live. However, they aren’t for everyone. Short-term health insurance is not subject to Affordable Care Act requirements, which means you can be denied coverage based on your health history and your policy will not include all of the ACA’s essential health benefits—this is why short-term plan premiums are typically lower than unsubsidized ACA plan premiums.

If you’re relatively healthy, don’t qualify for ACA subsidies and don’t need the full range of benefits offered by a major medical insurance plan, then a short-term plan could be an option that makes sense for you.

Advantages

  • Available year-round, not subject to open or special enrollment periods. 
  • Premiums can be economical. 
  • Choose your plan length, from 30 days to 364 days, depending on the state.
  • Network-free plan options that allow you to use your preferred healthcare providers.
  • You don’t pay for benefits you wouldn’t need during a temporary amount of time (e.g., maternity).

Disadvantages

  • Not guaranteed issue—your application can be denied based on most pre-existing conditions.
  • Limited coverage—not all of the ACA’s preventive services and essential health benefits are included (e.g., maternity).
  • Not available in every state.
  • Won’t typically cover pre-existing conditions.
  • In some states, when your policy ends, you will need to reapply and gain approval to begin a new policy.

2. Private Health Insurance

If you don’t qualify for a subsidy but want ACA-compliant coverage, then a private health insurance plan could be the right alternative for you. Private plans are available directly from a carrier that sells major medical insurance or a web entity such as HealthCare.com.

While some carriers offer plans both on and away from the federal and state-based health insurance exchanges, others may only participate in one or the other. Carriers may also sell differing plans through the exchange and private market. That means you could have different options in the private market, and you may potentially find lower premiums there as well.

Keep in mind that plans purchased in the private market do not qualify for premium tax credits and cost-sharing subsidies. If your financial situation changes and you become subsidy-eligible, you will need to enroll in an exchange-based plan to take advantage of ACA subsidies. Keep in mind that open and special enrollment periods are the only times you can enroll in or switch ACA plans through the exchanges or in the private market.

Advantages

  • Guaranteed to receive coverage.
  • Includes all of the ACA’s essential health benefits and preventive services.
  • Available in every state.
  • Your rate is based on age, location, tobacco use, individual or family enrollment, and plan category; it cannot be based on your health history or sex.
  • Additional plan options and potentially lower rates than plans offered through the federal and state-based exchanges.

Disadvantages

  • Can be expensive when unsubsidized (subsidies are not available in the private market).
  • Requires use of provider networks, which can be limited.
  • Not available outside of open enrollment unless you experience a qualifying life event to become eligible for a special enrollment period. 
  • Not subsidy-eligible if your financial situation changes.
  • Deductibles can be quite high. 

3. Limited Duration Benefit / Fixed Indemnity Plans

Fixed indemnity plans, also known as limited duration benefit plans or ‘no deductible’ plans, provide set benefit amounts for covered medical services at specific durations. For example, when you receive medical care covered by your limited duration benefit policy, you will receive a fixed benefit amount per visit, per event, per day, per week or per month, up to a set limit. Within your policy, the amount and duration will vary depending on the benefit that applies.

The benefit is typically paid directly to you after you receive covered care, and you can use it to pay for out-of-pocket medical expenses. Because a fixed indemnity plan can be paired with any other insurance for added protection, you can use your benefits to pay for the coinsurance, copay and deductible amounts for your ACA or short-term policy as well as any medical care it doesn’t cover.

Advantages

  • Available year-round.
  • If you choose, it can be paired with any other health insurance for added protection. 
  • You can use benefits paid to you to pay your major medical deductible (if applicable) and other out-of-pocket costs.

Disadvantages

  • Limited coverage—not all ACA essential health benefits and preventive services are included.
  • Not guaranteed issue. 
  • Will not typically cover pre-existing conditions.

4. Faith-Based Plans

Membership in a healthcare sharing ministry, also known as a health cost sharing ministry or faith-based healthcare organization, is another coverage option if you don’t qualify for ACA subsidies and are considering alternatives. 

On the surface, faith-based health plans can appear similar to health insurance—you pay a fee to receive access to coverage. However, faith-based plans are not health insurance. As such, it doesn’t have the same legal protections as health insurance—complaints can’t be made to state insurance commissioners, plans are not required to have financial reserves, and claims are not guaranteed to be paid. 

What faith-based plans are is a healthcare cost-sharing arrangement among like-minded people who pool expenses to help one another pay for healthcare. In addition to financial support, members may provide one another with other types of support such as notes of encouragement or prayer. 

Advantages

  • Can be an economical option for individuals or families who think they can’t afford health insurance with premiums that cost less than traditional plans.
  • Supporting and receiving support from others who share your values. 
  • Available year-round. 
  • Available in every state.

Disadvantages

  • Not considered health insurance. 
  • Limited coverage—not all ACA essential health benefits and preventive services are included.
  • May not cover pre-existing conditions or preventive care.
  • Not eligible for ACA subsidies.

Which Health Insurance Alternative is Best?

There’s not a universal best choice when it comes to choosing coverage other than an ACA plan. Your decision will depend on factors such as your healthcare needs, your eligibility for policies that aren’t guaranteed issue, and what you can afford to pay for a monthly premium and out-of-pocket costs if you need medical care.

Most will agree, however, that if you qualify for a subsidy, then an ACA plan is probably your best option. It is a way to gain access to the most coverage at the most affordable rate. If you don’t qualify for a subsidy, or if your subsidy is not big enough to make an ACA plan affordable, then it may be worthwhile for you to investigate the options mentioned above. 

There can be a lot of information to navigate and consider as you make a decision, and some of it may be confusing. If you need help understanding these options, have questions about them, or want help determining which might be right for you, contact a licensed health insurance agent or the company that provides the coverage you’re investigating.