The ACA and the “Buy and Drop Game”

Let’s follow on with the topic of savvy shoppers and health insurance….

There have been several articles and threads pertaining to buying, keeping, or not buying health insurance all together. One thread that stands out is the ‘talk’ about how people will buy health insurance only when they need it. Then, drop it as soon as their medical need ends…then doing it all over again…and again…and again.

Let’s stop and really think about this. How often do you think you will need health insurance coverage in a year? For some of you maybe not at all. For others, especially as they age, the likelihood is much greater. As we now know, under the Patient Protection and Affordable Care Act (PPACA, ACA, or Obamacare) preexisting conditions must now be covered. So…you could be ok in that regard if you want to go through the “buy and drop” cycle. But before you decide to enter this revolving door, let’s look at one significant factor about purchasing your new health insurance under the ACA. Remember the buzz surrounding the new Health Insurance Marketplace (or Exchange)? The Exchange is designed to help millions of un-insured/underinsured legal Americans with paying their health insurance premiums. These premium tax credits can only be obtained by completing an application and ultimately purchasing health insurance through the Exchange (either federally or state managed exchange). The amount of the premium tax credit (also referred to as a premium subsidy) is based on your total household income. So, that’s the good news; help in offsetting monthly premium costs. BUT, here is the kicker. The Marketplace/Exchange is only open during a limited time period – called the open enrollment season. For calendar year 2014, the Marketplace/Exchange will be open between 1 October 2013 and 30 March 2014. Then it reopens in November 2014 for several weeks for calendar year 2015, and so on. So, if you want to take advantage of the premium tax credit you can ONLY purchase your insurance during these limited enrollment windows. You can’t play the “buy and drop” game. You are either in or you are out for the calendar year. Note, if you experience a life-changing event (divorce, death of spouse, birth of child, adoption etc) then you will be able to purchase health insurance through the exchange outside of the enrollment window.

However, if a premium subsidy isn’t important to you, you still have two options for health insurance: 1. go completely without, pay a penalty as health insurance is required under the ACA, and run the risk of unexpected healthcare costs, or 2. purchase insurance through the open/individual market (through private carriers, agents, brokers).

If you decide to forego insurance and are willing to pay the “insurance penalty”, will you be willing and able to pay full price for your prescriptions? What if you need one or several prescriptions on a monthly basis? Full price prescriptions can be very expensive! If you need to go to the Doctor, are you willing to pay full price for an office visit, which can run $100 on the low end up to several hundreds of dollars depending on your Doctor’s specialty? What happens if you have an accident and need surgery, which can run into the 10s of thousands of dollars? Can you afford that? Many households have gone bankrupt due to all types of unexpected medical expenses. So, before you completely discount the need for health insurance, make sure you take into account all of the out-of-pocket costs that you may incur. You might find the cost of health insurance, either through the Exchange or the individual market, outweighs the penalty and possible financial risk of going without.

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