The next open enrollment period for the Affordable Care Act begins Nov. 1 and runs through Jan. 31 of next year. During this three-month window, you’ll have a chance to sign up for health insurance from a private broker, the federal insurance exchange site or your state-run marketplace depending on where you live. This will mark the fourth year for Obamacare sign-ups, but some consumers are still a bit confused about the process. If you’re hesitant to enroll in a major medical plan, you’re not alone. Knowing what you’re getting into before you sign up will save you time, money and frustration. Here are several of the most common mistakes that people make when signing up for Obamacare – and how to avoid them.
1. Waiting Until the Last Minute
Open enrollment lasts for about three months. That might seem like plenty of time to make your choice and sign up, but too many people wait until the last minute to enroll. Last-minute signups can cause a variety of problems, including:
- Technical problems with the site
- Slow, unreliable connections
- Hasty decisions that cost money
- Lack of coverage due to missing documentation
If everyone waits until the last minute to sign up, there will be slow connections and delayed response times, especially on federal or state exchange sites. You may not face this kind of problem if you enroll through a private broker or a third-party insurance website, but those who sign up on the marketplaces could see substantial delays.
Regardless of how you enroll, last-minute decision-making is never a safe bet when it comes to health insurance. You’re more likely to choose a policy that you don’t need because you don’t have time to research your options, and you may be so rushed that you forget to submit appropriate documentation. This could lead to a delay in getting covered or a rejection altogether. Under the Affordable Care Act, you can’t be denied a major medical plan based on certain factors – like age, sex or health status – but you can be denied subsidies or coverage if you fail to provide the right documents. At the very least, your coverage could be delayed.
Don’t wait until the end of January to start shopping. With three months to enroll, you have some time to evaluate the options, so start early. You’ll feel better knowing that you’ve made the right choice if you give yourself enough time to plan ahead.
2. Not Shopping Around
Federal and state health insurance exchange sites, which were created specifically to help consumers find affordable coverage options, might make it seem like your only choice is to buy through a government entity. That’s not the case. In fact, third-party private brokers still exist, and you can still take advantage of off-marketplace options. The primary benefit of the marketplaces is that they offer subsidies, called Advanced Premium Tax Credits, which can be applied to your monthly premiums to lower the cost. Anyone who earns between 100 and 400 percent of the federal poverty limit will most likely qualify for cost assistance, so start with the exchanges to see if you can get a lower premium.
If you can’t get a subsidy – or even if you can, and you want to explore your options – take some time to shop other sites and local insurance brokers for better deals. Unlike with home or auto insurance, you can’t change your mind about your health insurance midway through the year. Unless a major life event happens, such as marrying or having a baby, you’re stuck with your health care plan until the next open enrollment cycle. When shopping around, consider the following:
- Coverage level and network
- Premium cost, coinsurance rates, the deduction amount and out-of-pocket maximums
- Company rating and reputation
Health insurance is now presented in four metal tiers: bronze, silver, gold and platinum. Platinum offers the highest level of coverage, followed by gold, silver and bronze. But a platinum plan may not be what you need for yourself or your family. Most families end up with a silver plan since it offers good protection with lower premiums. The lowest-priced silver plan is also the benchmark that the government uses to calculate subsidies. Comparing policies can sometimes feel like comparing apples and oranges. That’s why you should take the time to consider the kind of coverage you’re looking for. Make a list of what you need and then apply that list to the policies that you find.
3. Being Unprepared
As easy as it is these days to sign up for health insurance, you’ll still need to do some homework before you get started. One of the easiest mistakes to make is forgetting to gather up important documentation. In general, you’ll need the following to get started:
- Basic information, like full names and birthdates, for your household
- Social Security information for everyone signing up
- Income information for wage earners in your home
On federal or state marketplaces, wage information is used to determine if enrollees qualify for cost assistance. If you don’t get a regular paycheck or you get paid irregular wages, then you’ll need to estimate your income appropriately. For non-exchange sites, you’ll need basic information and your Social Security number. You may also be asked more specific questions, like whether you smoke. Remember that you can’t be denied coverage for health problems, and you won’t be asked about those. But insurers can ask whether you smoke, and you may be charged higher rates because of it.
4. Giving Up Because of Technical Problems
In the early days of enrollment, Obamacare signups stalled because people were unable to use the newly created marketplaces. Technical glitches can frustrate even the most determined enrollee. Since then, the government has put more effort into streamlining the signup process. HealthCare.gov, the federal exchange site, is more user-friendly and offers good information for getting started. If you’re having technical problems signing up on a marketplace or independent broker’s site, don’t be afraid to call the customer service line for help. You might be tempted to give up because a website seems complex or you’re having trouble navigating it. Instead, let tech support guide you to a resolution. Skipping out on health insurance over a technical glitch will cost you more in the long run.
5. Misrepresenting Your Income
If you use a state or federal marketplace to sign up for coverage, then you’ll need to report your income so that the system can determine if you qualify for tax credits. These tax credits, also called subsidies, reduce your monthly premium – by a lot in some cases. For instance, residents of Alaska benefited from substantial savings in 2016. The lowest-priced silver plan cost $719 a month for Alaskans this year before any tax credits. After the subsidy, that same plan dropped to $163 a month – a savings of about 77 percent. With this great potential for savings, you’ll want to be careful to report your income as accurately as possible. Keep this in mind:
- If you overestimate your income, then you’ll miss out on your full tax credit, which means you’ll pay more for coverage than you would have to otherwise.
- If you underestimate your income, then you will probably owe money back to the government to make up the difference in subsidy amount. Since you were given a bigger break than you would otherwise qualify for, you’ll be responsible for paying back the difference.
- You can and should report changes in income during the year, which we’ll discuss in the next section.
Reporting income is easy to do for people who earn a regular wage from an employer, but not everyone works a standard 9-to-5 job. Self-employed people, for example, don’t always know when they might get paid or how much they will earn for the year. If you don’t get a regular income, then estimate how much you’re going to make for the year using tax returns from your last few years. If this is the first year that you’re earning irregular income, then do your best to estimate your earnings.
6. Failing to Update Your Details
Situations change, and you may earn more or less income than you did when you first enrolled. One common mistake that people make is to forget to update their situation throughout the year, especially if it impacts income. Those who get a subsidy from a state or federal exchange will need to let the government know if something changes about their income. This is easy to do. You simply log back onto the Obamacare website that you used to enroll and submit the relevant documentation. If you earn a very irregular income that varies substantially from month to month, then you might consider taking your tax credit as a lump sum at the end of the year instead. Most people use their subsidies to offset the cost of monthly premiums, but you do have the option to take it as a single tax credit when you file your annual taxes.
Regardless of how you choose to apply the subsidy, make sure that you report any income changes as they happen so that you receive the appropriate amount. Otherwise, you may not get enough. Even worse, you may owe money to the government for overpayment.
7. Looking Only at Premium Price
For people who are new to buying insurance, it’s easy to get caught up in the monthly price tag. However, premium price isn’t the only cost associated with health insurance. You will still be responsible for copayments, coinsurance, deductibles and out-of-pocket expenses, so it pays to be informed on what your plan charges.
A lower premium plan typically includes a higher deductible, which means that you’ll have a higher threshold to hit before the insurer covers the cost of care. Coinsurance rates are also important since these determine the portion of your treatment that you’ll be responsible for regardless of deductible. Research the cost of medical services and treatments in your area to find out if the plans you’re considering are really a good deal.
Keep in mind that all major medical plans created in the post-ACA landscape have an out-of-pocket maximum. This is the absolute most that you’ll be required to pay out of your own pocket for medical care. The out-of-pocket maximum includes what you pay for deductibles, copayments and coinsurance. It does not include premium payments or anything that you have to pay for that your plan doesn’t cover. On the marketplace, the out-of-pocket maximum for the year is $6,850 for individuals and $13,700 for families. Once you hit these totals, your insurer will cover the rest of the bill.
8. Not Enrolling at All
The biggest mistake you can make when it comes to health insurance is not signing up at all. Whether you’re a single person or part of a family of five, insurance can seem pricey, complicated, and daunting. You may even decide that paying the penalty fee for noncompliance is cheaper than having coverage. This is only true at face value. Under the Affordable Care Act:
- The penalty fee for not having insurance in 2016 is the greater of $695 per adult or 2.5 percent of your total taxable income.
- For kids, you’ll add an extra $347.50 per child if you’re using the flat-fee schedule.
- Fees will continue to increase each year based on inflation. Percentage rates have increased modestly, but the flat fee for 2016 is already six times higher than it was for 2014.
Premium rates are higher with better levels of coverage, but you’re getting more bang for your buck by buying health insurance at any tier level. That’s because hospital bills can be astronomical. Unpaid medical bills are the biggest source of debt in the U.S. One trip to the ER without insurance could cost nearly twice as much as the penalty fee for being uninsured. In 2013, the average cost for the 10 most common emergency room visits was just over $1,200.
There are other benefits to having health insurance outside of emergency protection. The health care system is shifting its focus toward prevention. Preventing major medical issues is much better for patients – and substantially more economical – than treating long-term conditions. Signing up for insurance gives you access to covered preventive screenings, which could help you lead a longer and healthier life.
It’s not always easy to find time for things like choosing a major medical plan and signing up for coverage. However, health insurance offers a wide array of benefits. Obamacare signups have improved since the marketplaces opened three years ago, and federal and state governments are always working to enhance the enrollment experience. Regardless of the presidential outcome in 2016, the current system will remain in place for at least the upcoming season, so take some time to familiarize yourself with your options to make signing up as simple and hassle-free as possible.