Navigator Guide FAQs of the Week: What Are the Risks of Buying Off-Marketplace?


Open Enrollment is in full swing, and the deadline for coverage beginning January 1 in most states is just two weeks away. While it can be tempting to search for an affordable plan online, plans sold outside of the health insurance marketplace may not be required to provide important Affordable Care Act (ACA) protections, like coverage of pre-existing conditions. To avoid insurance scams, consider CHIR expert Dania Palanker’s advice and be wary of Google search results. Even searching for terms like “Obamacare” can lead consumers away from ACA-compliant insurance and down a rabbit hole of “junk plans.” Consumers should also beware of red flags such as pressure to provide a credit card number right away or an insurance broker refusing to share plan information in writing. As part of CHIR’s weekly Navigator Resource Guide series, we’ve highlighted FAQs on some of the pitfalls of buying a plan off-marketplace.

If I buy an individual health plan outside the health insurance marketplace, is my coverage going to be the same as it would be inside the marketplace?

Not necessarily. There are some health plans sold outside the health insurance marketplace that are required to provide the same basic set of benefits as plans sold inside the marketplace, are not allowed to exclude coverage of a pre-existing condition, and are also required to provide a minimum level of financial protection to their consumers. Specifically, these plans must cover at least 60 percent of what the average person would spend on covered benefits and there is a cap on the maximum amount you will pay out of pocket ($8,700 for an individual and $17,400 for a family in 2021).

However, it is important to note that you may only obtain premium tax credits and cost-sharing reductions if you purchase a plan through the health insurance marketplace. For 2021 and 2022, there is no income limit on eligibility for premium tax credits, so most people will do better to buy coverage through the health insurance marketplace.

While plans sold through the health insurance marketplace must be certified by the marketplace as meeting minimum coverage and quality standards, plans sold outside the marketplace need not be certified.

Contact your state’s Department of Insurance for a list of reputable brokers who can direct you to these plans, which are sold outside the marketplace, but are still required to provide the same protections as plans sold inside the marketplace.

If you decide to forgo health insurance marketplace coverage and premium tax credits, there may be other coverage options available outside of the marketplace that are not required to provide the Affordable Care Act’s protections. These include plans that are not traditional health insurance products, including short-term, limited duration insurance, association health plans, health care sharing ministries, and farm bureau plans. If an insurer or entity cannot provide a Summary of Benefits and Coverage that indicates the coverage is minimum essential coverage, be aware that the plan may have coverage limitations, particularly for pre-existing health conditions or for basic medical care.

I received a call/mailer selling me new coverage that is much cheaper than what is available on HealthCare.gov. How do I assess my options?

HealthCare.gov is the only place you can purchase coverage that is guaranteed to provide all the consumer protections of the Affordable Care Act. It is also the only place to buy coverage with premium tax credits. For 2021 and 2022, there is no income limit on eligibility for premium tax credits, so most people will do better to buy coverage through the health insurance marketplace. Be sure to find out what your cost would be to buy coverage in the health insurance marketplace, taking into account any premium tax credits and cost-sharing reductions that may apply.

If you decide to forgo coverage in the health insurance marketplace, proceed with caution when evaluating options outside of the health insurance marketplace, as there have been reports of fraudulent activity and deceptive practices. In order to evaluate your options outside of the marketplace, contact your state’s Department of Insurance for a list of reliable brokers who can assist you in assessing your options. Always insist on getting plan documents to review prior to buying a plan, particularly when purchasing a plan outside of the marketplace.

An agent offered me a policy that pays $100 per day when I’m in the hospital. It’s called a “fixed indemnity plan.” What are the risks and benefits of buying one?

A fixed indemnity plan is not traditional health insurance and enrollment in one does not constitute minimum essential coverage under the Affordable Care Act. These companies are supposed to provide policyholders with a notice that the coverage is not minimum essential coverage.

A typical fixed indemnity plan will provide a fixed amount of money per day or over a set period while the policyholder is in the hospital or under medical care. The amount provided is often far below the patient’s actual costs. Thus, consumers often find that they pay more in premiums than they get in return. Consumers who suspect that a fixed indemnity plan is falsely advertising itself as health insurance should report the company to the state department of insurance. (See Other Resources, When and How to Contact Insurance Regulators for a list of state Departments of Insurance).

Peace of mind isn’t the only benefit of shopping for a health plan on the marketplace this year. Due to enhanced subsidies enacted under the American Rescue Plan Act (ARPA), many individuals and families are eligible for additional financial assistance, making marketplace plans both affordable and reliable. For more guidance on enrolling in health coverage, please consult our updated Navigator Resource Guide.

 





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