Health Insurance Deductibles and Obamacare
It’s important to select an Obamacare health insurance plan that meets your financial as well as your medical needs. Obamacare health insurance costs are broken out into several categories, including premiums and cost-sharing fees such as copayments, coinsurance and deductibles.
Premiums vs cost-sharing fees under Obamacare
A health insurance premium is the amount paid to maintain health insurance coverage regardless of health services used. Cost-sharing fees are out-of-pocket expenses paid for by the policy holder, with the insurance company paying for the rest. Copayments, coinsurance and deductibles are all forms of cost-sharing that come into play only when you receive medical services or supplies.
- Copayments: Also known as “copays,” these are fees paid out of pocket for office visits and prescriptions. Depending on your plan, there may also be copayments associated with things like ambulance trips.
- Coinsurance: This is typically a percentage of the total charge for certain covered medical expenses, paid for by the policy holder. For example, the insurance company might pay for 80% of covered lab work while the policy holder pays for the remaining 20%.
- Deductibles: This is a dollar amount that must be paid by the policy holder before an insurance company will begin to pay for covered medical expenses within a single year (some exceptions may apply).
In this article, we will provide you with some helpful information on health insurance deductibles under Obamacare, the commonly-used name for the health reform law officially known as the Affordable Care Act.
Obamacare was signed into law on March 23, 2010. Since 2014, when major provisions of the law took effect, all new individual and family health insurance plans may be considered “Obamacare” plans. Many of these Obamacare plans utilize deductibles.
More details about deductibles under Obamacare
A deductible is a dollar amount you may be required to pay out of your own pocket towards covered medical expenses before your Obamacare insurance plan will “kick in” and begin paying. This is a form of cost-sharing. Once the deductible is paid, the insurance company will typically pay for most of your covered medical care for the remainder of the year.
Should you experience a high-cost medical expense (such as a hospitalization, surgery, etc.), you may have to pay your deductible in full (if no other expenses have been applied toward it that year) before your Obamacare insurance plan will begin paying your medical bills. If the costs associated with your medical expenses meet or exceed the amount of your deductible, you’ll pay your deductible in full.
After that, additional copayments and coinsurance may apply until you reach your plan’s maximum out-of-pocket limit for the year, depending on your plan.
The out-of-pocket maximum amounts for Obamacare plans in 2016 are:
- $6,850 for individual plans
- $13,700 for family plans
How much are Obamacare deductibles?
Annual deductibles under Obamacare can range in cost and vary depending on whether the plan is an individual or family plan. Some plans may have no deductible at all, while others can have high deductibles. According to eHealth*, the average annual deductibles for plans selected by unsubsidized health insurance shoppers during the 2016 open enrollment period were:
- $4,120 for individuals
- $7,760 for families (of two or more people)
Obamacare subsidies and deductibles
Government subsidies (also known as “premium tax credits”) may help offset the cost of premiums and, in some cases, deductibles for consumers who qualify. Under Obamacare, those who purchase coverage on their own and earn no more than 400% of the federal poverty level may be eligible for subsidies:
- For families of four in 2016, this amount is roughly $97,000
- For individuals in 2016, this amount is roughly $47,000
The dollar amount of the subsidy varies depending on your household income and on the cost of coverage in your area.
For most people, subsidies can only be used towards their monthly premiums. However, those earning no more than 250% of the federal poverty level and who are enrolled in a silver-level plan may also qualify for an additional cost-sharing reduction. This cost-sharing reduction is a government subsidy that is designed to help reduce the burden of deductibles, copayments, and coinsurance.
Obamacare deductibles and preventive medical care
Under Obamacare, many preventive medical services may not apply to the annual deductible. This is a good thing, since it enables people to get preventive medical care at no out-of-pocket cost, even if their deductible amount has not yet been paid in full. Free preventive care under Obamacare typically includes:
- Annual check-ups
- Women’s health checks
- Certain other preventative medical screenings
Can I use my Obamacare HSA to pay my deductible?
Yes, you can! HSAs, or Health Savings Accounts, are special savings accounts that enable you to deposit and withdraw money to pay for qualifying medical expenses on a tax-free basis. HSAs must be paired with plans that meet a minimum deductible requirement. These plans are sometimes referred to as “high-deductible health plans.”
Money can be deposited into an HSA on a pre-tax or tax-deductible basis. This money may then be used to pay for a broad range of qualifying medical expenses. Though contribution limits apply, pre-tax deposits into an HSA can help lower your tax bracket, enabling some people to qualify for income-based Obamacare subsidies. While HSA-eligible health insurance plans tend to include higher up-front, out-of-pocket costs, saving money on taxes and potentially accessing cost assistance in the form of subsidies can save you money over time.
The minimum deductible requirements for pairing an Obamacare health insurance plan with an HSA in 2016 are:
- $1,300 for individual plans
- $2,600 for family plans
If your Obamacare health insurance plan deductible is equal to your HSA contribution, you can use your HSA money to pay for your full deductible tax-free.
In addition to paying for out-of-pocket expenses like your annual deductible, HSAs can also be used to pay for things like the following on a tax-free basis:
- Dental and vision care
- Over the counter medications
- Nursing services
- Eye glasses and contact lenses
Some restrictions apply, of course. Contact your licensed accountant for more information. For a complete list of qualifying medical expenses, see IRS Publication 502, Medical and Dental Expenses.
*For more information on the dollar figures quoted in this sections, see eHealth’s Health Insurance Price Index Report for the 2015 Open Enrollment Period: http://news.ehealthinsurance.com/_ir/68/20152/Price-Index-report-2015_final.pdf.