Affordable Care Act
What to Do When Your Health Insurance Costs Increase
Published on September 23, 2016
No one likes to see their health insurance rates increase, but it’s a common experience. In fact, most health insurance plans adjust their rates at least once per year. Notices of upcoming rate changes are commonly mailed to policy holders in the fall, with new rates coming into effect in the new year.
A lot of health insurance consumers are confused about rate increases and unsure about their options. In this article we’ll clear up some common misconceptions and provide you with a few tips to help you find affordable coverage.
Why health insurance costs raise
Contrary to what some people imagine, when your health insurance premiums increase, it’s nothing personal. The insurance company is not raising your rates because you specifically saw the doctor too often or had an expensive surgery in the past year.
In most cases, when the health insurance company raises your rates, they’re generally raised for everyone enrolled in that particular health insurance plan in your geographical area and age group.
Insurance companies typically raise rates because of increases in the cost of providing medical care, or because the people enrolled in your plan in your area are using more, or more expensive, medical services than anticipated. Most rate changes must be approved by state or federal regulators.
What you can do when your health insurance costs increase
Your choices are pretty simple, really. You can stick with your current plan, or you can switch to a new one. There’s one other riskier choice too: you can drop your coverage and go uninsured – but that will potentially leave you open to a penalty on your federal tax return and, of course, there’s the risk of being uninsured when you need expensive medical care.
Let’s look at the first two options in more detail.
Sticking with your current health insurance plan
Depending on the size of your rate increase, you may decide to just stick with your current health insurance plan. If, say, you’re happy with your plan and the rate increase for the next year is only 3%, sticking with your current plan may be a good option.
If you’re currently enrolled in government subsidies that help cover the costs of your monthly health insurance premiums, you may not financially feel a rate increase in some cases. Qualifying consumers with taxable income of no more than 400% of the federal poverty may be eligible for subsidies – but the dollar value of your subsidy is also tied to the “benchmark” plan in your area. So long as the rate for that benchmark plan increases at least as much as the rate on your current plan, the dollar value of your subsidies should increase enough to keep pace.
Shopping around for a new health insurance plan
It’s never a bad idea to consider new health insurance options at least once per year – especially when you’re facing a rate increase on your current plan. If you decide it’s time to shop around, here are a few things to keep in mind:
- There are two kinds of health insurance costs. First, there’s the premium you pay to maintain your coverage month to month. But then there’s also the out-of-pocket costs you may face when you actually receive medical care. These usually take the form of copayments, deductibles, or coinsurance. When considering a new plan, be sure to balance out these costs in a way that makes sense for you. Switching to a new plan with a lower monthly premium may give you a higher annual deductible. Make sure you can afford that deductible if faced with serious medical expenses.
- You can’t always enroll in a new health insurance plan mid-year. You may have to wait for the open enrollment period. Obamacare’s open enrollment period typically runs from November 1 through January 31. Coverage under any new plan you enroll in during open enrollment will generally not begin until January 1 at earliest.
- Outside of open enrollment you may be able to enroll in a new health insurance plan if you’ve recently experienced a qualifying life event such as marriage, divorce, the birth or adoption of a child, a move to a new coverage area, or major changes in your income that may affect your eligibility for government subsidies. Qualifying life events typically triggers a 60-day special enrollment window.
Where to find help when shopping for health insurance coverage
If your health insurance costs are going up and you want to shop around, consider shopping through a licensed health insurance agent, like eHealth. Licensed online agents can help you compare coverage options from multiple insurance companies and find the best match for your needs and budget. They can even help you make sure your new plan covers the drugs you need and the doctors you prefer. Remember, it never costs anything extra to shop through a licensed agent.