Going without health insurance coverage is a huge risk—one that many people are unwilling to take. Fortunately, public health care exchanges, created under the Affordable Care Act (ACA), provided millions of Americans an affordable option. For the next 2 years, the recent Stimulus Plan makes those exchanges even more accessible and affordable—and not just to low-income Americans.
"One of the silver linings of the pandemic has been an increase in public health spending that makes it much easier for many Americans to qualify for a premium tax credit subsidy," says Aditi Sharma of Fidelity Financial Solutions Group. For the first time, people earning more than $51,520 may now be able to take advantage of the significant premium reductions offered by public health exchanges.
That could make public exchanges an attractive option for many people who are not covered by an employer plan, their spouse/partner's employer plan, or Medicare. It could also be a boost for those who are looking for a way to cover health care costs until age 65, when they are eligible for Medicare. This strategy can also help people delay claiming Social Security and capture a higher benefit.
"Whether you're in between jobs, working part-time without benefits, or even working as a consultant as you approach your retirement horizon, you still need reasonably priced health insurance coverage. Thanks to the Stimulus Plan (official name: the American Rescue Plan Act of 2021), quality coverage that you can afford may now be available to you and your family," says Sharma.
Am I eligible for coverage in a public exchange?
The ACA (also known as Obamacare) paved the path for the creation of a public health care exchange*, generally designed to help those without access to employer-sponsored health care coverage find health insurance that fits their needs.
How much you'll pay for coverage depends on a variety of factors including family size, the plan you select, and something known as modified adjusted gross income (MAGI), which includes wages, tips, Social Security, unemployment, and other forms of income.
Can I receive a subsidy?
The ACA provides government subsidies for some people, based on MAGI. Prior to the pandemic, people who made 1 to 4 times the federal poverty level for their household size were eligible for a tax subsidy. The Stimulus Plan now provides significantly higher premium subsidies as the cap on the 400% Federal Poverty Level (FPL) is removed for the next 2 years (see chart).
| Federal Poverty Levels (FPL) used to determine subsidy for 2021 Marketplace Plans | ||||||
| # of household members | FPL | 400% of FPL | ||||
|---|---|---|---|---|---|---|
| 1 | $12,880 | $51,520 | ||||
| 2 | $17,420 | $69,680 | ||||
| 3 | $21,960 | $87,840 | ||||
| 4 | $25,500 | $102,000 | ||||
| 5 | $30,040 | $120,160 | ||||
| 6 | $35,580 | $142,320 | ||||
| Source: www.healthcare.gov For illustrative purposes only. FPL is the Federal Poverty Level. Estimates shown are for all US states, except Alaska and Hawaii | ||||||
Don't assume you aren't eligible for a subsidy because you have too much money. "Although you may have accumulated significant retirement or personal savings assets, you may still be eligible to receive a subsidy because your current income may have fallen off," says Sharma. "This may be important for people recently laid off due to the COVID pandemic or workers who don't have access to employer-sponsored health care."
The Stimulus Plan temporarily expanded eligibility and increased the amount of these premium tax credits for many individuals. In certain situations, depending on age and income levels, these credits may reduce monthly premium amounts significantly. However, these subsidies generally are not available to individuals who are offered employer-sponsored coverage.
"Overall, adults with incomes above $51,520—the level known as 400% of the FPL—would generally see some of the most significant savings from the Stimulus Plan over the next 2 years," says Sharma.
Tip: See if you qualify for an advance premium tax credit on the healthcare.gov website.
When and how can I sign up?
The special enrollment period will be available in the 36 states through August 15, 2021 that use the HealthCare.gov platform. The 14 states (plus DC) that operate their own state-based exchanges may announce similar special enrollment extensions. Individuals may be eligible for premium tax credits that subsidize exchange coverage.
6 steps to get started
- Gather your Social Security number and information about your income and household size.
- Enroll during the current special enrollment period at Healthcare.gov or your state marketplace.
- Once you enroll, the exchange sends your information to the insurance carrier.
- Your insurance carrier sends you a confirmation email and/or insurance card in the mail.
- Your coverage start date is based on when you pick a plan. But you can't use your coverage until your eligibility is confirmed and you make your first premium payment.
- Start using your insurance.
Tip: Insurance carriers are no longer allowed to exclude applicants based on preexisting conditions, so they don't need as much personal medical information as they used to, although you will need to provide information about your smoking habits.
What plans are available?
The exchanges categorize plans into 4 levels, determined by the way health care costs are shared by the consumer and the insurance carrier. Plans at the highest level, called "platinum plans," cover, on average, an estimated 90% of an individual's health care costs. Gold plans cover 80%, silver plans cover 70%, and bronze plans cover 60%. Individuals under age 30 can opt for catastrophic policies: These carry the lowest premiums of any plan, but they do not qualify for income-based subsidies. (see graphic)
Tip: Be sure to consider potential costs beyond the premium. Look at what each plan requires for copays and deductibles. Also ask if your plan will limit your ability to receive services from medical providers outside of the defined network. Plans with a limited network can offer a considerable discount in price, as long as you are aware of their limitations.
Picking a plan: 6 things to know about exchanges
- Each plan offered through an exchange includes networks of health care providers. See if your doctor participates in the plan
- If your doctor is outside a particular plan's network, you may want to switch to a new doctor who is in your network or you may end up paying more for care.
- Unless the plan pays out-of-network benefits, the plan may not pay any benefits to health care providers outside your plan's network and you could be responsible for paying the entire cost.
- During the application process, you can review plans to see whether your primary care doctor and other providers are considered in-network. If your state has several insurers providing plans, you may find that one insurer's plan will cover care from your existing doctor, while another insurance carrier's plans won't.
- Just because your doctor is part of the overall network offered by an insurance carrier doesn't mean they are part of all networks associated with all plans offered by that insurance carrier.
- If you are managing a chronic condition or expect to incur expenses for certain medical procedures next year, make sure that the specialists are participating in your network.
Connection to Social Security and Medicare planning
There are lots of health care and financial decisions to make as you transition to retirement. For some people, the new tax credits can go a long way in helping to secure their retirement. In addition to needing a strategy to generate retirement income and claim Social Security, you may need to develop a strategy to help you bridge the gap until you are eligible for Medicare coverage at age 65.
For example, say you're 63 and paying $1,000/month in health care premiums. Instead of tapping into your retirement nest egg or claiming Social Security now to pay for premiums until your enroll in Medicare, try this: Use the savings from your ACA premium tax credits over the next 2 years to help pay for essential expenses. That way, you could boost your retirement income by claiming Social Security at a later age.
Remember, at age 65, you should enroll in Medicare when you're first eligible, (unless you’re working and enrolled in an employer plan) to avoid the risk of a delay in Medicare coverage and the possibility of a Medicare late enrollment penalty.
Tip: Read Viewpoints on Fidelity.com: Your bridge to Medicare and Should you take Social Security at 62?
Get help
Looking for help to navigate your health care and retirement needs? Working with a financial professional can help you plan the course that's right for you.