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Employer Health Insurance vs. Individual Plans: What helps me more?

Having health insurance is critical. In many cases, you end up paying less when you go for a doctor’s visit than you would if you didn’t have it. Your co-pay (aka the portion of the charges you cover) might be only $50 instead of hundreds of dollars. If you have a big family or pre-existing health conditions, those amounts add up quickly if you have to pay the full bill.

The difference for a hospital visit is even more significant. You could rack up a bill for many thousands of dollars if you have a baby or get injured in a car accident. Hospital charges like these could bankrupt you if you have no health insurance at all.

Where can you get health insurance? Aside from Medicare, Medicaid, and military programs, there are two possibilities.

Many employed Americans have health insurance coverage provided by their employers.

Alternatively, you might be able to buy an individual plan on your own, either through the Health Insurance Marketplace or directly from a health insurance company.

Here are the pros and cons of each:

Employer-Provided Health Insurance

Pros:

  • Your employer might pay part of the cost of the premiums which makes the insurance much less expensive for you.
  • Your premiums are taken out of your paycheck on a pre-tax basis, which means you’ll pay less in income taxes.
  • Enrollment is easy; you sign up during your employer’s open enrollment period.
  • Health insurance is not taxed like your earned wages or bonuses.

Cons:

  • Your employer might offer only a limited number of plans.

Individual Health Insurance Plans

Pros:

  • A large selection of plans is available so you might have more choices.
  • You can choose your plan from the Health Insurance Marketplace options or a health insurance company.
  • If you meet the income standards, you might qualify for reduced premiums.

Cons:

  • The premiums can be quite expensive because you have to pay the entire amount yourself.

How Much Does Health Insurance Cost?

There’s no easy answer to this question.

Choosing a health insurance plan can be overwhelming and confusing. Many variables affect the cost, such as:

  • Are you single or have a large family?
  • Do you have existing health conditions that need treatment regularly?
  • Do you take a lot of medications?
  • Are you planning to have a hip replacement or other surgery in the upcoming year?
  • Are you willing to pay larger regular premiums as a possible trade-off for lower annual deductibles?

Employers or health insurance providers sometimes offer helpful tools for you to evaluate the options. It might be easier to look at two or more plans side-by-side to quickly compare the variables.

Mandatory Health Insurance

You might wonder if health insurance is mandatory. Part of the Affordable Care Act requires everyone (including dependents) to have the minimum essential health insurance. If you don’t have coverage or qualify for an exemption, the IRS might charge you a shared responsibility payment, which people often refer to as a penalty.

To meet the requirement, you need to be enrolled in and entitled to receive benefits under a qualifying plan for a minimum of one day during each month of the calendar year.

However, calendar year 2018 is the last year you have to comply with the federal individual health mandate.

Starting on January 1, 2019, it’s your choice whether you have healthcare coverage. However, check the laws of the state where you live. Healthcare coverage might still be required.

It’s an important individual decision for you and your family. However, many options are available. The sensible course of action is to get at least some minimum coverage. Even if you remain relatively healthy, you’ll want to be covered in case of a medical catastrophe that you didn’t expect.

About Valerie Rind

Valerie Rind is the author of the award-winning book, “Gold Diggers and Deadbeat Dads: True Stories of Friends, Family, and Financial Ruin.” With expertise in a broad range of personal finance and lifestyle topics, her work has been featured online in Time, Forbes, Fortune, MSN, U.S. News & World Report, The Huffington Post, PBS Next Avenue, and her own website at ValerieRind.com.

During a hiatus from a corporate career, Rind worked for a housing authority where she created its pilot personal finance program for low-income individuals. She was one of the founding volunteer moderators for the myFICO community forum.

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