How to Create Your Own Insurance Benefits Package


December 4, 2017

Buying or Bundling Alternative Health Insurance Products Could Save You Money

Finding and enrolling in an affordable health insurance plan is a challenging and perplexing process. The Affordable Care Act requires you to enroll in a qualifying health insurance plan or face a monetary penalty. The ACA alone makes it difficult enough to figure out how to find a quality health plan without all the terms such as deductibles, copays, coinsurance, premiums and networks that make the process even more demanding.

Despite the law, what if you feel you are young enough or healthy enough that you don’t need major medical, or you just can’t afford the premiums and deductibles under any Obamacare plan? In this instance, you have to ask yourself if it’s more affordable to just pay the penalty and figure out a way to buy your own affordable health insurance using alternative methods.

If you have no intention of signing up for major medical insurance, you can bundle different kinds of insurance products to give you some coverage at a reasonable price. If your healthcare needs are low, here are some ways to use alternative methods, such as ancillary products, to get coverage.

What are Ancillary Products?

Ancillary products include but are not limited to coverage for dental, vision, critical illness, accidents, long-term care and life insurance. People with group plans from an employer may see these products listed as “voluntary” benefits because they’re usually optional add-on benefits that employees can purchase along with major medical. Many comprehensive health insurance plans do not offer coverage for such things as dental care, vision or long-term care. Additionally, if you need the comfort of life insurance, you must buy it separately from your healthcare.

Voluntary or ancillary benefits aren’t just for people with major medical coverage. An increasingly popular strategy is to bundle these kinds of products together as an alternative to major medical insurance while having some type of protection in place in the event of emergencies. Although bundling ancillary benefits won’t meet the minimum essential requirements under Obamacare, it will give you coverage options if you don’t need major medical. Let’s talk about some of these products.

Accident Insurance

This type of coverage pays you a specific dollar amount if you have a covered injury or accident. In most cases, the insurance company pays you and not your medical provider, which gives you the flexibility to use the funds as you see fit.

Critical Illness Insurance

If you’re diagnosed with a serious medical condition, a critical illness plan will pay you to help cover your expenses. Critical illnesses typically fall under three categories: heart attacks, strokes and cancer. Some policies may cover expenses related to heart transplants, coronary surgery, kidney failure or paralysis, and some may limit how much you receive for certain types of cancer. Most critical illness plans pay you directly, allowing you to use the money to cover anything, from medical bills to mortgage payments.

Fixed-Indemnity Insurance

A type of supplemental health insurance plan, fixed-indemnity plans cover services such as hospital confinement, inpatient or outpatient surgery, ambulance services, emergency room visits and physician office visits for follow-up treatment. Fixed-indemnity plans are designed to help supplement high-cost plans, and healthcare experts advise that you should not use the plans as stand-alone health insurance. If you have a high-deductible health plan, fixed-indemnity coverage could help alleviate some of your deductible costs.

Short-Term Insurance

Although short-term health insurance is not considered an ancillary product, many Americans are turning to this type of coverage if they don’t need major medical or just cannot afford a comprehensive plan. Also known as term health insurance, these plans usually last for as little as 30 days up to 90 days and typically offer low monthly premiums. However, short-term health insurance does not count as qualifying insurance, so if you choose one of these plans, you are subject to the Obamacare tax penalty.

The coverage you receive from one of these plans is not as comprehensive as major medical plans. Although each short-term plan is different, most policies do not cover prescription drugs, mental health services, substance abuse services, childbirth or pre-existing conditions. These plans also set limits on payment for the cost of certain procedures, and limits may be much lower than the actual cost. Robust short-term health plans do exist, but it pays to shop around if you have no intention of signing up for comprehensive coverage.

Most short-term plans are used as a stopgap between coverage. For example, if you lose your job and your health insurance, you can use a short-term plan for coverage while you’re unemployed or waiting to qualify for your new job’s benefits plan. It’s not a great idea, though, to use a short-term plan on its own. Monthly premiums are usually low, but these plans do not offer enough coverage if you’ve got a lot of medical needs or a family to support. Temporary policies do not cover preventive medical care, immunizations or well-child visits.

Short-term health insurance is a viable option if you are young, healthy and single and feel you have no need for comprehensive coverage, but you should talk to a broker or agent first to understand the fine print. In October, Donald Trump signed an executive order requiring government health agencies to explore ways to loosen the rules on short-term plans and other group health insurance plans. It’s possible that short-term health plans may count as minimum coverage one day, but for now, having one of these plans in place won’t keep you from the ACA penalty for not having coverage.

Packaged Medical Insurance

Some Americans are turning to packaged medical insurance to avoid the rising costs of Obamacare. Packaged insurance bundles contain several specific types of coverage that might include products like vision, dental, critical illness and accident insurance into one plan. Packaged plans might also offer discounts on prescription drugs, and some plans offer telemedicine benefits, an increasingly popular feature that allows you to contact medical professionals online or by phone.

Packaged plans allow you to spread out your risk by offering different ancillary products in a single bundle. But like short-term health insurance, packaged medical insurance plans do not meet the minimum essential coverage requirement under Obamacare.

Minimum Essential Coverage and the Tax Penalty

If you don’t plan on signing up for major medical insurance during this enrollment period, you should know how much your tax penalty will be in 2017 and what qualifies as minimum essential coverage. The penalty in 2017 for not having minimum essential coverage is the greater of 2.5 percent of your household’s taxable income, or $695 per uninsured adult and $347.50 per uninsured child. The Kaiser Family Foundation offers a free calculator to see if you are subject to the tax penalty. If you are considered low-income, you may be exempt from the penalty, and you may qualify for government-backed health insurance programs such as Medicaid or the Children’s Health Insurance Program (CHIP).

Any major medical plan sold on or off the Obamacare marketplaces (and created after March 23, 2010) meets the minimum essential coverage requirements. Also known as ACA-compliant plans, these health plans cover 10 essential benefits; forgo medical underwriting so that they’re guaranteed-issue, meaning people with pre-existing conditions don’t have to worry about being refused coverage; eliminate caps on benefits and payouts from insurers; and offer a bevy of other mandated protections for enrollees. In order to buy a major medical policy in the private market for 2018, you only have until December 15, 2017 in most states. Ancillary products, like accident or critical illness coverage, can be purchased year round.