In most cases, if you have access to employer-sponsored health insurance, that’s going to be your best option—especially since you likely won’t be eligible for a premium subsidy to offset the cost of an individual/family plan. But maybe you’re trying to decide whether you should leave your job and transition to an individual plan, or maybe it’s a budget-buster to add your family members to your employer’s plan, and you’re considering a separate plan for the rest of the family.
This article will explain how to compare job-based health insurance with the Obamacare plans available on your Affordable Care Act health insurance exchange in four easy steps.
The actuarial value of a health plan tells you what percentage of yearly healthcare expenses, on average, the health plan pays for its members. The higher the actuarial value number, the more valuable the health plan benefits are. For example, a health plan with an actuarial value of 85% will pay approximately 85% of all members’ covered healthcare expenses.
Members are expected to pay the other 15% of their covered healthcare expenses via cost-sharing requirements like deductibles, copays, and coinsurance (but understand that this is across an entire standard population; the percentage of costs that the plan pays for a specific member will depend on how much medical care the person needs during the year).
To discover the actuarial value of the health plans available through your job, you’ll have to ask. Your employee benefits or human resources department is the place to start. Another option is to call the customer service number for the job-based health plan you’re considering and get the actuarial value from a health plan customer service employee.
Bronze health plans have an actuarial value of approximately 60%. Silver health plans have an actuarial value of approximately 70%. (But if you’re eligible for cost-sharing reductions—CSR—the actuarial value of a Silver plan might be much higher than 70%) Gold health plans have an actuarial value of approximately 80%. Platinum health plans have an actuarial value of approximately 90%.
So, if the job-based health insurance your employer offers has an actuarial value of 72%, you’d pick a couple of Silver-tier Obamacare plans to compare it with since Silver plans have an actuarial value close to your job-based plan.
By comparing health plans of similar actuarial values, you’re ensuring that you’re comparing apples to apples. If you compared a 90% actuarial value health plan available at work with a 60% actuarial value exchange-based health plan, it would be an inaccurate comparison.
Ask your employee benefits or human resources department how much your contribution toward the cost of your health insurance premiums will be each month if you choose job-based health insurance.
To determine your cost for Obamacare health plans, you’ll have to go back to your health insurance exchange. You can get pricing information without creating an account or providing identifying information.
Since exchange-based health plans (like all individual market plans) are allowed to alter their premiums based on your age, where you live, and whether or not you smoke, you’ll have to enter this information into the online health insurance exchange portal before you’ll be able to get any pricing information. But you’re not required to create an account with the exchange in order to do this.
Although Obamacare health insurance is subsidized for most enrollees, it’s not likely to be subsidized for you. If you’re offered health insurance by your employer, you’re not eligible for an Obamacare subsidy unless the health insurance your employer offers is exceptionally lousy or unaffordable.
In this instance, exceptionally lousy means your job-based health plan has an actuarial value of less than 60%, or doesn’t provide substantial coverage for inpatient and physician services. Your employer’s health insurance would be considered unaffordable if your share of the cost for coverage for just yourself (regardless of what it costs to cover your family) costs more than 9.61% of your household income in 2022.
You might qualify for the premium tax credit health insurance subsidy to help pay for health insurance you buy from an exchange if the following are true:
Your income is at least 100% of the federal poverty level (or more than 138% of the poverty level if you’re in a state that has expanded Medicaid, which includes most states). The health insurance your employer offers does not provide minimum value, and/or your share of the premiums for job-based health insurance is not considered affordable based on your income.
But it’s very uncommon for an employer-sponsored plan to not provide minimum value and/or to be considered unaffordable for the employee’s portion of the coverage. If your employer offers coverage, chances are you’re not going to qualify for subsidies in the exchange.
However, if you do meet the criteria for subsidy eligibility, the best way to determine your cost for the Obamacare plans you’re comparing with your job-based health plan is to enter your income into the exchange’s quote tool and get an estimate of how much the health plans would cost based on your income.
You can then choose to apply for subsidized coverage through your health insurance exchange. Creating an account with the exchange and applying for financial assistance does not obligate you to buy the health insurance or accept the financial aid. You can still decide to choose your employer’s health plan instead (assuming you’re within your initial enrollment window or the employer’s annual open enrollment period, or you’ve experienced a qualifying event that triggers a special enrollment period).
If you’re not eligible for an Obamacare subsidy, you can just look at the full-price premium for the individual market plans you’re considering. You can get these prices from the exchange or directly from an insurance company (and a broker can help you get that information, regardless of whether you’re looking at plans in the exchange or plans sold directly by insurance companies).
If your cost for all of the plans is relatively similar, then you can base your decision on the health plan structure you like best. Evaluate the best fit for your needs by looking at:
The type of health plan (HMO, PPO, EPO, or POS plan) How the cost-sharing is structured The health plan’s provider network The health plan’s drug formulary Health plan quality and satisfaction ratings
If you like the freedom to go out-of-network and you’re willing to pay a little more when you do, consider a PPO or a POS plan. If you don’t mind staying in-network to keep your costs low, an HMO or EPO might serve you well.
(But pay attention to out-of-pocket costs for out-of-network care on plans that cover it. You might find that the out-of-pocket costs are so high that you’d need a great deal of out-of-network care in order to start getting benefits from your health plan.)
If you don’t have any savings or can’t afford to pay a large deductible, a health plan with a lower deductible but higher copayments or coinsurance rates might make you feel more comfortable.
If you have your heart set on keeping your current primary care physician (PCP) or specialist, check each health plan’s provider network. Before committing to the health plan that includes your PCP in its network, call the doctor’s office to confirm they’re still in-network with that health plan and that they’re not planning on dropping out of its network any time soon.
If you take prescription medications, check each health plan’s drug formulary to make sure your specific prescription drugs are covered.
If you’re interested in contributing to a health savings account (HSA), pay attention to the HSA-qualified high deductible health plans (HDHPs) that are available to you. You’ll need to be enrolled in one in order to make contributions to an HSA.
Lastly, check the quality and satisfaction ratings for the health plans you’re considering. You can do this with the health plan report cards available on the National Committee for Quality Assurance’s website. All other things being equal, if one has great ratings while another has poor ratings, the decision will be easier.
Understand the Family Glitch (and the Proposed Fix)
Keep in mind that in most cases, you’re going to find that your employer’s plan is the best choice. This is due in large part to the fact that your employer will be paying a chunk of the premium, whereas it’s extremely unlikely that you’ll get any financial assistance with an individual market plan.
(This is assuming you continue to have access to the employer-sponsored plan. If you’re doing this comparison to see how you’ll fare if you become self-employed or retire early, you can disregard the employer subsidy and check your eligibility for subsidies in the individual market based solely on your household income.)
Unless there are significant additional factors, such as network coverage, that impact your decision, the cost of the individual market plan is likely to be quite a bit more than the cost of your employer’s plan.
But the situation for your family members might not be so clear-cut. If your family is caught by the family glitch, you might find that the cost to add them to your employer-sponsored plan is prohibitively expensive. They’re unfortunately still not eligible for financial assistance in the exchange (at least through 2022), but they might choose to purchase a less expensive full-price plan—likely with lower actuarial value—in the exchange.
The Biden administration is working on a fix for the family glitch in 2022, and it’s expected to be in place by the 2023 plan year. If finalized as proposed, this rule change would make some employees’ family members newly eligible for subsidies in the exchange. But families would then have to decide whether it’s worth splitting the family onto two separate plans (employer-sponsored coverage for the employee, and exchange coverage for some or all of the rest of the family). And some families won’t actually be subsidy-eligible, even with the new rules in place.
But the take-away point is that it’s important for families to check all of their options for 2023 and future years, since the family glitch is likely to be less onerous than it was in previous years. And some families will find that they have newly-affordable options for self-purchased coverage.
A Word From Verywell
If you have employer-sponsored health insurance, your employer is likely subsidizing a significant portion of the total premiums for your coverage. You’d forfeit that if you decided to obtain your own health coverage in the exchange instead.
But if you’re leaving your job and have the option to take COBRA (which would require you to pay full price for your coverage), keep in mind that an offer of COBRA does not make you ineligible for premium subsidies in the exchange. So you can reject the COBRA offer and potentially qualify for premium subsidies that would make your self-purchased coverage much more affordable. Here’s more about deciding between COBRA and self-purchased coverage.
