When does it make sense to buy Health Insurance on the exchange?

Individual health insurance plans can be purchased through federal or state exchanges or directly from an insurance company or broker (unless you are a resident of Washington, D.C., which does not have an off-exchange market). Both venues sell ACA-compliant plans which offer ten essential benefits, cap out-of-pocket costs, include coverage for pre-existing conditions, and don’t place monetary limits on lifetime or annual benefits. In most cases, choosing to purchase a plan on or off the exchange also has little impact on risk, since insurance companies pool the risk for both their on- and off-exchange plans. What’s the real difference between purchasing through the exchange and purchasing elsewhere, then?

One of the main reasons to purchase an insurance policy through the exchange is to take advantage of premium and cost-sharing subsidies. These subsidies are only available to those who meet certain financial requirements but can provide significant savings, especially if one qualifies for both types. Those who qualify for one or both of these subsidies are still able to purchase plans outside the exchange if desired, but doing so will prevent them from claiming their subsidies. If you meet the financial requirements, then, it is probably best for you to stick to on-exchange plans so that you can take advantage of the subsidies available to you.

Even if you do not currently qualify for one of these subsidies, it is still worth considering an on-exchange plan in case your circumstances change at some point during the year. If you purchase a plan through the exchange and experience a significant income change during the year which makes you eligible for one or both subsidies, you can start receiving them right away or claim them later on your tax return. However, if you purchased a plan off the exchange, you will need to wait until open enrollment and switch plans in order to take advantage of the subsidies you now qualify for. Thus, it is a good idea to purchase a plan through the exchange if there is any reasonable chance that your income will change significantly over the course of the next year. If you are confident that you will not qualify for a subsidy during the next several months, you can feel free to browse the plans available both on and off the exchange and choose the one that best fits your budget and medical needs.

It should also be noted that while ACA-compliant plans can be found on and off the exchange, not all off-exchange plans fall into this category. This includes short-term health insurance, critical illness plans, and other plans not marketed as individual major medical health insurance. While these types of plans can still be useful and may be worth taking a look at, they do not need to adhere to the same kinds of standards that ACA-compliant plans must meet, and thus the coverage they offer may not be as robust.

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