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Who is eligible for Marketplace premium tax credits?

Premium tax credits are available to U.S. citizens and lawfully present immigrants who purchase coverage in the Marketplace and who have income between 100% and 400% of the federal poverty level. Premium tax credits are also available to lawfully residing immigrants with incomes below 100 percent of the poverty line who are not eligible for Medicaid because of their immigration status. (Generally, immigrants must lawfully reside in the U.S. for five years before they can become eligible for Medicaid.)

In addition, to be eligible for the premium tax credits, individuals must not be eligible for public coverage—including Medicaid, the Children’s Health Insurance Program, Medicare, or military coverage—and must not have access to health insurance through an employer. (There is an exception in cases when the employer plan is unaffordable because the employee share of the premium exceeds 9.86% of the employee’s income in 2019. There is also an exception in cases where the employer plan doesn’t provide a minimum level of coverage.)

Can I buy health insurance outside of the Marketplace that meets all ACA standards?

Yes.  Many insurers that offer policies through the Marketplace also offer identical policies outside of the Marketplace, in the individual health insurance market.  These ACA-compliant policies also will meet all ACA standards.  They will cover essential health benefits; and they won’t turn you down, charge you more, or limit coverage based on your pre-existing condition.  In addition, ACA-compliant policies will only be offered during Open Enrollment, or at other times during the year, only to people who are eligible for a special enrollment period (SEP).

Sometimes people prefer to buy outside of the Marketplace, for example, when they are sure they won’t qualify for financial assistance. However, many other policies that are not ACA-compliant are also for sale outside of the Marketplace, and this can make comparison-shopping more complicated.

Some signs that a health policy is not ACA-compliant include:

  • The application asks questions about your health status or health history
  • The policy doesn’t cover essential benefits, such as maternity care or prescription drugs
  • The policy has annual or lifetime dollar caps on covered benefits
  • The policy is offered for sale outside of Open Enrollment to people regardless of whether they’re eligible for an SEP, for example, because they recently lost other coverage

Plans that are not ACA-compliant, including short-term health insurance, may have lower premiums because they can exclude people with pre-existing conditions and offer more limited benefits.

If you are shopping outside of the Marketplace and you want an ACA-compliant policy, be sure to specify that to the insurer or broker you’re working with.

Finally, even if you think you won’t qualify for financial assistance, it still might be worthwhile to shop for coverage on the Marketplace.  All policies offered through the Marketplace will meet ACA standards; no other non-compliant products are sold there.   In addition, if you are not eligible for financial assistance now, but your circumstances change later during the year (for example, your income declines), you can begin receiving financial assistance right away if you are already covered under a Marketplace plan.  Or, when you file your tax return at year-end you can claim a premium tax credit to have some of the premium you paid for the Marketplace plan refunded to you.  However, if you bought an ACA-compliant policy outside of the Marketplace, and then you become eligible for financial assistance mid-year, you may have to wait until the next Open Enrollment to switch to a Marketplace plan and get financial assistance.

An agent offered to sell me a policy that pays $100 per day when you’re in the hospital. Does that count as Minimum Essential Coverage?

No. Some types of coverage do not qualify as minimum essential coverage. These include hospital indemnity policies (that pay a fixed dollar amount per day when you are hospitalized), discount plans, short-term nonrenewable policies, or plans that provide coverage only for a specific disease (i.e., cancer-only policies). Companies that sell these products, also called “excepted benefits,” are required to notify you if they don’t qualify as minimum essential coverage. If you receive such a notice, at a minimum, ask more questions about how the policy might cover pre-existing conditions or protect you from unaffordable medical bills.  Be aware that excepted benefit policies are not an equivalent substitute for Marketplace policies that meet Affordable Care Act standards.

Are short-term policies available everywhere?

No.  Several states have prohibited the sale of short-term policies unless they follow all of the standards that apply to plans sold through the Marketplace — including standards prohibiting discrimination against people based on their pre-existing conditions.  These states include California, Hawaii, Massachusetts, New Jersey, New York, and Oregon; other states may consider similar action in the future.

I notice some insurers offer the option to buy two or more consecutive short-term policies with no medical underwriting required after the first application. So does that mean I’d be covered if I buy a sequence of short-term policies and then get sick?

Probably not.  Each of the consecutive policies that you would buy would likely include a pre-existing condition exclusion.  So, for example, if you are healthy enough to buy two consecutive short-term policies today, and then you get cancer while covered under the first policy, your cancer would be considered a pre-existing condition when the second policy starts and so would be excluded from coverage under the second policy.

By contrast, a qualified health plan sold through the Marketplace will never exclude pre-existing conditions.

I’m pretty healthy now. Does it make sense to buy a cheaper, short-term policy now, and then go back to a Marketplace policy if I do get sick?

That strategy involves some risks.  First, if you do get sick while covered under a short-term policy, it might not cover benefits for the care you need.  For example, many short-term policies don’t cover, or only provide limited coverage for prescription drugs.

Second, if you do get sick while covered under a short-term policy, the insurer can look back to see if your condition could be considered “pre-existing.”  For example, if you are diagnosed with cancer, the insurer might decide the cancer was growing in you before you bought the policy, even though you didn’t know it, and so exclude coverage for the pre-existing condition.

Third, if you become seriously ill or injured while covered under a short-term policy, the insurer will most likely refuse to sell you new coverage once your policy term ends.  At that point, you might be able to buy a comprehensive policy through the Marketplace that won’t turn you down, but these are only offered during annual Open Enrollment periods and new coverage won’t start until January 1.  That means you could be  uninsured for many weeks or months before new Marketplace coverage begins.  Loss of coverage under a short-term policy will not make you eligible for a special enrollment period to buy Marketplace coverage mid-year.

I heard about a short-term policy that has an option to renew. Does that mean I can keep it even if I get sick after buying the policy?

Maybe.  Under a new regulation issued by the Trump Administration, short-term policies can include renewal features that would enable people to continue coverage for up to three years.  However, before buying the policy, it would be important to know if the policy is renewable at your option or at the option of the insurance company.  If it is only renewable at the insurer’s option, you probably wouldn’t be allowed to renew after you get sick.

It would also be very important to ask about how renewal premiums will be set.  Short-term policies in most states are allowed to set premiums, including renewal premiums, based on health status.  So if you do get sick, even if you have the right to renew the policy, you might not be able to afford to keep it.

Can a short-term policy turn me down if I have a pre-existing condition?

Yes.  In general, the application for short-term policies will ask questions about your current health status and your health history.  Depending on your answers, if you have or have had a pre-existing condition you might be turned down or charge more.  How short-term policies treat you also depends on where you live.  A few states have passed laws to prohibit short-term policies from discriminating based on health status.

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