Types of Health Plans
Choosing the right health coverage is easier once you learn about the differences among Obamacare plans.
The Affordable Care Act (ACA) has simplified health plans into four "metal" tiers of coverage.
They consist of the following:
All four of the plans offer the exact same level of quality health care.
In fact, by law, every Obamacare plan must at least provide for the Ten Essential Health Benefits. These benefits include:
- ambulatory care;
- emergency services;
- hospital coverage;
- maternity and newborn care;
- pediatric services (including dental and vision);
- mental health and addiction treatment;
- prescription drug benefits;
- rehabilitative coverage;
- laboratory services; and
- preventative services and chronic disease management.
The difference among all four plans has to do with how much they cost.
In general, Bronze plans have lower premiums each month, but cost you more out-of-pocket when you need care. On the other end of the spectrum, Platinum plans have a higher monthly rate, but you pay less out-of-pocket for expenses such as deductibles, coinsurance, and copayments when you need care.
When choosing a plan, it is best to consider your total costs for health coverage. Some key questions to ask yourself include: How often will I need to see the doctor? Am I comfortable paying less per month, but risking higher out-of-pocket costs if I were to go to the doctor, fall ill, or need emergency care?
Typically, those who just want a low monthly premium, and do not think they will need much more than preventative care usually opt for a Bronze plan. Those who regularly need medical services typically go with a Gold or Platinum plan. Silver plans are a popular choice, as many find they strike a nice balance between low monthly rates and out-of-pocket costs. Silver plans uniquely offer some cost-savings benefits, which are discussed in detail below and more here.
Premium Tax Credits and Cost-Sharing Reductions
Here is another thing to consider: You could substantially save on your plan’s monthly rate if you qualify for the Premium Tax Credit. The Premium Tax Credit was created to help make insurance affordable for all. Specifically, if you meet certain income guidelines, the federal government will help pay for your monthly insurance bill in the form of subsidies. The payment is made directly to the insurance company on your behalf. Think of it as a discount applied on top of your plan.
Generally speaking, individuals with lower incomes qualify for a larger Premium Tax Credit, and will pay less per month. All four metal plans can receive the Premium Tax Credit.
Cost-Sharing Reductions can help you save even more by lowering your out-of-pocket costs. Like the Premium Tax Credit, you must meet certain income guidelines to qualify for Cost-Sharing Reductions. Similarly, those with lower incomes tend to receive a greater reduction amount, meaning they would pay less out-of-pocket for deductibles and copayments when using their insurance.
As mentioned above, Cost-Sharing Reductions are only available with a Silver plan. Those who qualify for both the Premium Tax Credit and the Cost-Sharing Reductions can substantially lower their total cost for health coverage. Many find that it is the best of both worlds, meaning they pay the low monthly rate of a Bronze plan, while paying the low out-of-pocket costs of a Gold plan. Not surprisingly, Silver plans have become very popular.
Catastrophic plans are a fifth type of plan. Although they have the lowest monthly cost, the benefits are primarily limited to emergency situations, and you must meet certain eligibility requirements. As their name suggests, these plans provide health coverage during worst-case, emergency scenarios. Catastrophic plans have the most affordable monthly rates, even lower than the rates of Bronze plan; however, their out-of-pocket costs tend to be the highest. Also unlike the metal plans, preventative care benefits are limited.
|Plan Type||Medical Expenses You Pay (does not include your premium)||Medical Expenses You Pay (does not include your premium)|
|Catastrophic||More than 40%||Less than 60%|
To qualify for a Catastrophic plan, you must either be under the age of 30, or have a hardship exemption at any age. You may qualify for a hardship if you are experiencing:
- An eviction/foreclosure;
- A notice of shutoff from your utility company;
- Domestic violence or a death in the family;
- A natural or man-made disaster.
- Bankruptcy or substantial debt from medical expenses;
- An increase in expenses due to caring for an ill, disabled, or aging family member;
- Claiming a child as a tax dependent who was denied Medicaid or CHIP;
- If you won an appeal for previously being denied a qualified health plan, but were denied eligibility at the time;
- You lost coverage in the past, but found qualified health plans to be unaffordable;
- Some other hardship related to obtaining health insurance.
Short-term insurance plans are designed to bridge gaps between coverage when you are not eligible to enroll in an ACA-approved plan (one that meets the minimum essential coverage requirements (see below for the actual requirements) as set forth by the ACA. But, they typically only cover catastrophic situations. That means that if you want to go see the doctor for a routine physical, you’ll be paying out of pocket, as short-term plans don’t cover routine and preventative care.