It’s becoming a predictable part of American life. Each year, the costs for access to health care increase. Health insurance costs rose an eye-popping 28.2% from September 2021 to September 2022, according to the Bureau of Labor Statistics’ Consumer Price Index. The United States was already spending an estimated $12,318 per person on health care annually, more than double the average rate of $5,829 other wealthy countries spend.
For people without high-quality employer coverage and whose income is too high to qualify for subsidies, the marketplace options often carry significant sticker shock. Here’s what you need to know about choosing the best Affordable Care Act (ACA) plan for your situation during open enrollment, which started Nov. 1 and runs through Jan. 15, 2023.
You might qualify for financial aid
Some people qualify for subsidies on health care premiums. If your income is below 400% of the federal poverty level — that’s $54,360 for a single-person household — you qualify. If you make even a dollar over that limit, it could mean the difference between a $50 monthly premium and a $1,000 monthly premium, depending on your age and where you live. (This is known as the subsidy cliff.)
Fortunately, part of the Inflation Reduction Act extended through 2025 the subsidies for health care purchased through the marketplace and capped premiums at no more than 8.5% of household income. This means even more people will qualify for some form of subsidy to help reduce costs.
Compare several plans
“If you’re sure you don’t qualify for a subsidy, you’ll just need to look for the plan that provides the best overall value,” advises Louise Norris, a health policy analyst for healthinsurance.org.
If you’re loyal to a specific doctor or practice, you’ll want to prioritize a plan that includes them in their network. Most state marketplace enrollment websites have a search function that allows you to filter plans based on provider coverage.
Get expert health insurance help
A marketplace navigator or licensed health insurance agent can be helpful when you want to compare plans, especially for those with high coverage needs. When you’re trying to figure out which plan covers your prescription medications and how much each plan covers, it can get overwhelming. If you have several prescriptions and regularly see more than one specialist, you might want to seek help to sort through the choices.
Marketplace navigators are paid through state and federal grant programs, and independent insurance agents are paid directly by insurance companies. Either way, it’s free to use either type of professional.
Figure out how much coverage you need
Deciding which plan provides the best value to you depends on your health insurance needs. If you’ve had health insurance in the past, most plans have an online portal that allows you to see how much health care you’ve used in previous years. This can be a great tool for deciding which plan will offer you the most value.
If you anticipate using a lot of health care, you may be best served by the plan that has the lowest total costs when premiums and the maximum out-of-pocket are added together since they can reasonably expect to have to meet the out-of-pocket maximum, Norris says. While deductibles and coinsurances can vary, focusing on the out-of-pocket maximum can help you get a reasonable idea of how much you’ll have to pay in a year if you have hit it multiple times in the past.
On the flip side, “if you don’t anticipate having much in the way of medical needs, you may want to focus mostly on the monthly premiums, since that’s the only amount you have to pay no matter what,” Norris says.
Focusing on reducing your monthly premium costs and contributing the difference to a health savings account can help you cover the higher deductible costs in a year you do have a medical emergency while also helping you to save for retirement.
Consider an HSA
Don’t be too quick to discount a high-deductible health plan. These plans generally allow you to contribute to a health savings account (HSA) making them a valuable option for everyone regardless of their individual health care needs.
The reason? “The tax advantages of an HSA can be significant if you opt to fully fund the HSA each year,” Norris adds. Not all high-deductible health plans allow you to make HSA contributions, so make sure you choose a plan that qualifies — it will carry a flag that says HSA-eligible — if you’d like to take advantage of this tax-advantaged account.
The HSA contribution limits for 2022 are $3,650 for individuals and $7,300 for families. The limits will increase, to $3,850 and $7,750, for 2023.
An HSA is a triple-advantaged investment account. First, money that goes into your account is pre-tax. The money you invest within that account grows tax-free. Finally, money is withdrawn tax-free when used for qualified medical expenses. Contributing can help you reduce your taxable income and give you a valuable medical emergency fund.
There’s no time limit for using the HSA. That means you can keep receipts for eligible medical expenses and reimburse yourself several years later, after your HSA investments have grown.
Even if you can’t afford to hit the contribution limits, you should strongly consider stashing some money every month into an HSA. You’ll save on taxes and have money set aside for years when you may hit your deductible.