No one likes to think about getting sick or having an accident, but it is important to be prepared with adequate health coverage. Medical bills can have a massive impact on your long term finances, which can derail your future plans. Unfortunately, many people also need to balance the costs of medical coverage on their immediate finances.
So, which should you consider ACA or private insurance?
The ACA Basics
The ACA or Affordable Care Act is a healthcare reform that was brought into law in 2010 by President Barack Obama. Formally, the Patient Protection and Affordable Care Act, these reforms are more commonly referred as Obamacare.
The ACA includes a list of policies that were intended to expand the access to healthcare coverage to millions of previously uninsured Americans. This included expanding eligibility to Medicaid, mandating Americans purchase or obtain health insurance, the creation of health insurance exchanges and prohibiting insurers from denying coverage due to a preexisting condition. The ACA law includes cost sharing reductions and premium tax credits to help lower the cost of health insurance for lower income families and individuals.
All ACA compliant plans must cover “essential health benefits” including family planning, maternity care, emergency services, prescription medications, pediatric care, mental health services and hospitalization.
There is an open enrollment period each year to buy or switch plans on the Health Insurance Marketplace. It is only possible to enroll outside of the open season if your circumstances have changed, for example, if you lose your job which provided coverage, you’ve gotten married, become a parent or divorced.
ACA plans are available on the Healthcare Marketplace or Exchange. In many cases, plans are Federal or State government subsidized, which can provide lower monthly premiums. You can purchase plans on your own rather than through an employer or a government run program such as Medicaid or Medicare.
Are You Eligible for ACA Insurance?
In order to decide whether ACA or private insurance is best for you, you need to first know whether you’re eligible for ACA insurance and to use the Health Insurance Marketplace. There are no income limits, but to be eligible you need to live in the U.S, be a U.S national or citizen, or otherwise lawfully present and not be currently incarcerated.
The ACA provides special patient protections and when you are insured using the Health Insurance Marketplace, insurers cannot refuse you coverage based on having a pre-existing condition, there are no annual or lifetime coverage limits for essential health benefits and young adults are able to stay on their family’s plan until the age of 26.
The Health Insurance Marketplace offers a variety of plans. There are coverage options for medical care along with vision and dental. To check out the available options, you need to visit the Healthcare.gov website and find the marketplace for your state. Each state has its own marketplace with its own enrollment instructions.
During the open enrollment period each year, you can choose your first plan, continue with your current plan, make changes to your existing plan or choose a replacement plan. Bear in mind that if you’ve experienced a life event such as having a baby, getting divorced or even moving home, you may be able to change your coverage. Additionally, there are special enrollment periods for those with a household income below a set amount.
The Private Insurance Basics
Just like shopping for auto or home insurance, you can purchase private health insurance directly from an insurance provider or using a broker or online website. Often, you can create a tailored package to suit your specific healthcare requirements and preferences, and they must still offer the same essential health benefits as with ACA coverage. However, private insurance plans are not eligible for financial subsidy assistance.
The main draw for private insurance is that they tend to have a broader network, which can be advantageous, particularly if you have specialty care needs. While an ACA may have a cheaper monthly cost, if you need care from a physician or facility not covered in the ACA network plan, you could end up with more out of pocket costs throughout the year.
The Different Types of Health Insurance Plans
When assessing your healthcare coverage needs, it is important that you appreciate the unique features and differences between the different types of plans.
HMOs
An HMO or Health Maintenance Organization is a company that provides insurance coverage for subscribers using a specific network of healthcare providers.
Typically, HMO plans provide insurance coverage for an annual or monthly fee. The premiums tend to be lower with an HMO, as patients are directed at the health providers, but this does limit the coverage network.
PPO
PPO or Preferred Provider Organization is a type of plan which offers services from medical professionals and facilities to subscribed clients at a reduced rate. Providers in this type of network are known as in-network or preferred providers.
As a PPO subscriber, you have the option to see a healthcare provider outside of your network, but the rates will be more costly.
EPO
Exclusive Provider Organizations are almost like a hybrid of a HMO and PPO plan. With an EPO, you can receive services from healthcare providers within a certain network, but exceptions are possible for emergency care.
Another feature of EPO plans is that you may need to choose a primary care physician. A PCP is a general practitioner who treats for minor illnesses and provides preventative care. But, generally, EMO plans do not require a PCP to provide a referral in order for you to see a specialist physician.
HDHP
High Deductible Health Plans have a couple of unique characteristics. As the name suggests, there is a higher annual deductible compared to other plans. This is the amount of your insurance claim that you would need to cover yourself. However, typically, HDHPs have lower monthly premiums.
This is like increasing the deductible to bring down the cost of your auto insurance. HDHPs tend to be a good option for generally healthy people who don’t anticipate needing healthcare services outside of a medical emergency.
HDHPs also offer access to the tax advantaged Health Savings Accounts or HSAs. This allows you to contribute funds to pay for medical expenses not covered by your HDHP. These funds are not subject to federal income tax when you make your deposit.
CHDP
CHDPs or Consumer Driven Health Plans are a form of HDHP. You can pay for a portion of your medical services with pretax dollars. You can expect to pay a higher annual deductible, but the monthly premium costs are typically lower than other health plans.
POS
Point of Service plans provide different benefits to their subscribers according to whether they use preferred providers or out of network providers. POS plans include the features of both PPO and HMO plans.
Calculating the Cost of Your Health Care
When you’re trying to work out whether you’re better taking out private coverage or picking an ACA plan, you need to know an estimate of your total costs for each plan per year. While many people may just look at the premiums, the deductible and out of pocket costs have the potential for a big impact on your budget.
To estimate your total yearly costs, you need to consider the following.
The Monthly Premiums
This is the easiest thing to calculate since you’ll get a quote for each plan. Look at the amount you will need to pay each month for your health plan and times it by 12 for the total yearly amount.
Deductibles
This is the amount for how much you will need to spend to cover certain health services and prescription drugs before the plan will pay. There is an exception to this for some preventative services with most plans.
For example, your health plan may charge for office visits, but you don’t incur any extra charges for preventative services as part of your visit.
Copayments
This is the amount that you need to pay your healthcare provider each time you receive care. For example, you may need to pay $20 per doctor visit or 30% of your hospital charges.
Out of Pocket Maximums
This is the most you will need to spend for covered services within the year. After you reach your out of pocket maximum, your insurer will pay for 100% of all covered services.
When trying to assess which type of insurance is the best value deal for you, you need to consider all of the above costs to get an overall estimate.
Factors to Consider When Choosing a Plan
As you should now see, there are numerous health insurance plans, each with a variety of features. However, it can be tricky to find a plan that offers everything, particularly if you don’t have an unlimited budget. To narrow down your options, you should consider the following.
Prescription Drug Coverage
One of the first things that you need to consider is whether the plan offers prescription drug coverage. Additionally, you need to check whether only generic drug products are covered. Be sure to check what copayment applies on both name brand and generic drugs.
Think about any medicines you are currently taking and how they would slot into your new plan. Would a new plan work out more cost effective for your current drug regimen or would you end up paying more?
Office Visit Copayment
Most plans have a copayment which applies each time you see your healthcare provider at an office visit. You need to assess how much this payment is and the typical yearly cost for you.
If you’re generally fit and healthy, therefore unlikely to need many office visits, you should be able to manage a higher copayment, which could reduce your monthly premiums. On the other hand, if you need to see your healthcare provider regularly, the copayment costs could quickly add up. Additionally, some plans have a maximum number of office visits that can be covered in a year.
Copayment for Specialized Services
If you need to visit an emergency room or need specialized services such as lab tests, x-rays or surgery, how much will you pay for your copayment charge? No one anticipates having an emergency room visit or needing more specialized care, but you need to make sure that if the unexpected happens, you can afford the copay charges.
The Provider Network
If you already have a doctor or healthcare provider that you like, you need to check if they are included in the plan’s network. You should also assess whether there are sufficient providers included in the network in your local area. Some plans, particularly ACA plans, can have a fairly small network, which can limit your accessible care. It is also worth checking what out of network fees may apply if you visit a hospital or provider not included in your plan.
Can You Add Coverage?
Check if your potential new plan allows you to add coverage for vision and dental. You also need to verify if the plan allows for pregnancy benefits, if needed.
Preventative Care Services
Some plans offer free or discounted preventative care services. This includes things like having an annual check up. Most ACA plans have free coverage for most preventative care, but not all plans have this benefit.
Lifetime/Annual Maximum Benefits
The ACA effectively eliminated annual and lifetime maximums for essential medical services, but some plans do still impose them for non essential services such as vision or dental.
A Quick Overview of ACA vs Private Insurance
| Feature | ACA Insurance | Private Insurance |
|---|---|---|
| Eligibility | Open to all individuals; subsidies available based on income | Usually offered through employers or directly from insurers |
| Cost | Varies based on income; subsidies can lower premiums | Costs depend on employer contributions or individual policy choice |
| Coverage | Covers 10 essential benefits, including preventive care, maternity, and mental health | Coverage varies by plan; may exclude certain benefits |
| Pre-Existing Conditions | Cannot deny coverage or charge more | Some private plans may have restrictions |
| Network of Providers | Typically includes a broad network, but may have limitations | Often has more flexibility with provider selection |
| Prescription Drug Coverage | Included in all ACA plans | Coverage varies; may require additional add-ons |
| Flexibility | Standardized plan options (Bronze, Silver, Gold, Platinum) | More customizable but can have gaps in coverage |
| Availability | Enrollment through Health Insurance Marketplace (Healthcare.gov) | Available through employers, brokers, or directly from insurers |
ACA vs Private Insurance: Which One is Best?
There is no easy answer to this question, as it will depend on your circumstances, preferences and requirements. ACA plans provide the opportunity to access tax subsidies if you qualify for financial health due to a low income. You can gain financial aid to cover some of your health insurance coverage if your income is between 100 and 400% of the national poverty level. There is a tax subsidy calculator, which can help you to check if you would qualify.
ACA insurance plans include essential health benefits. These are clearly defined by law to include certain benefits.
- Outpatient care without hospital admission
- Emergency services
- Hospitalization
- Mental health and substance use services including counseling, psychotherapy and behavioral treatment
- Rehab and habilitative services, which offers devices and services to help with disabilities, injuries or chronic conditions to recover or gain physical and mental skills.
- Maternity and newborn care
- Pediatric services
- Laboratory services
- Prescription drugs
- Preventative and wellness services.
These are also mandated with all private insurance plans, so you can rest assured that all your essential healthcare services are included in your coverage.
Another area of significant difference is the network size. Many ACA insurance plans have a smaller provider network. This is because ACA insurance carriers try to keep the monthly costs lower by having a narrower network. There are admin costs associated with managing coverage, so a small provider network helps to curb costs. So, it is vital that your preferred doctor and nearby hospital is in network before you take out a plan.
Private health insurance plans tend to be more flexible and it may be possible to access a wider range of healthcare services, but there is no financial subsidy assistance. This means that you will need to pay the entire cost of the coverage. So, while you may have broader coverage, you will carry the full financial burden.
ACA plans can be a good fit if you don’t get health insurance as part of your job benefits package, you want to access long term coverage or you qualify for premium tax credits. On the other hand, if you’ve missed open enrollment, you want more comprehensive coverage and you’re generally fit and healthy, private health insurance may be a better fit.
Bear in mind that there are short term plans available. These provide limited coverage for a limited time, so if you’ve missed open enrollment, you’re waiting for a new ACA plan to start or you’re waiting for your health benefits to begin from a new job, a short term plan can be a good compromise.
If you’re between jobs, an early retiree or you can’t get a family plan immediately to cover your children, you may want to consider a short term plan. However, it is important to note that there may be some limitations for pre-existing conditions and you will need to answer a number of medical questions before you can arrange cover.
Choosing a healthcare insurance plan can be a little daunting, and when you are struggling to decide between ACA and private coverage, it can be even more tricky. However, both types of insurance are designed to offer cover for health emergencies, so you will need to assess the additional benefits, network, financial aid and overall cost. It is well worth taking a little time to make some comparisons and this will help you to determine the value for money each plan provides, so you can get the best coverage at the best price for you.
