Your (or you and your family’s) healthcare is likely one of your biggest bills every month. Your health plan premiums, deductibles, and your own out-of-pocket costs may already be high if you have health insurance from an employer, and those expenses may be nearly unaffordable if you buy coverage on your own. Paying for health insurance if you’re self-employed or if you lose a job can be a huge challenge. Thankfully, several new developments – many from the recent stimulus bill — are making health insurance costs more affordable for people who don’t have employer coverage. Some of these new programs might make a difference. It’s worth taking time to reassess your health insurance options right now and find out whether you can save money at the same time you’re protecting your health.
Larger Premium Subsidies to Reduce Healthcare Costs
Many people who buy health insurance through Healthcare.gov or their state marketplace have been eligible for subsidies to help reduce their premiums, based on their annual income. The most recent stimulus plan, the American Rescue Plan, increased the size of the subsidies and eliminated the income cap. Now everyone can qualify for a subsidy to help reduce their costs. You can use the Kaiser Family Foundation’s health insurance marketplace calculator to estimate the size of your subsidy and the after-subsidy costs for policies in your area.
For example, a 35-year-old Chicago couple with two young children who earn $70,000 can qualify for a subsidy that brings their monthly premiums for a mid-level policy on the health insurance marketplace down to about $274 per month. The lower your income, the larger the subsidy. If their annual income were $50,000, they’d qualify for a subsidy that would bring their monthly cost for a mid-level policy down to about $68.
Many people don’t realize that they could qualify for such a large subsidy based on their income. And if they lost their job and are receiving unemployment benefits, they may even qualify to receive some plans with $0 premiums and reduced deductibles and copayments this year.
Generally, you can only get health insurance through Healthcare.gov or your state insurance marketplace during open enrollment in the fall – which is usually November 1 to December 15 – or within 60 days of losing your job. But because of an emergency rule, the federal government reopened the marketplace until August 15, 2021, for the 36 states that sell insurance through Healthcare.gov (and many states that run their own health insurance marketplace have also extended their deadlines). Go to Healthcare.gov for links to your state marketplace.
New Help With Premiums If You’re Laid Off
If you have health insurance at work but then you lose your job, you can usually continue your coverage under COBRA, a federal law that requires employers with 20 or more employees to let you continue your group coverage for up to 18 months after leaving your job (many states have similar rules for smaller employers).
Having the option to continue your employer’s insurance under COBRA can be helpful because you can keep your current coverage and doctors, and any money you’ve already paid towards the deductible for the year still counts. But the premiums have always been very high: Most employers cover about 75% of the premiums for their employees, but when you continue coverage under COBRA you usually have to pay both the employer’s and the employee’s share of the premiums – which could boost your premiums from 25% up to 100% of the costs. But the American Rescue Plan also provided help with COBRA costs for people who are laid off, covering 100% of the premiums for COBRA coverage for up to six months, ending on September 30, 2021. People who lose their jobs now, or lost them earlier but are still within their 18 months of COBRA coverage, can benefit from this subsidy. This COBRA subsidy is only available for people who lost their jobs involuntarily; people who left their jobs voluntarily must still pay the full cost of COBRA coverage.
Make the Most of Tax-Advantaged Healthcare Savings
Another move that can help anyone stretch their healthcare dollars – whether they have coverage through an employer or on their own – is to contribute to a health savings account. This special account provides a triple tax break: Your contributions are tax-deductible (or pre-tax if through an employer), the money grows tax-deferred, and you can withdraw it tax-free for eligible medical expenses in any year. Unlike flexible-spending accounts, there’s no use-it-or-lose-it rule.
To qualify to make HSA contributions in 2021, you must have a health insurance policy with a deductible of at least $1,400 for single coverage or $2,800 for family coverage. You can contribute up to $3,600 in 2021 if you have single coverage or $7,200 for family coverage, plus $1,000 if you’re 55 or older. You can withdraw the money tax-free for medical expenses either now or in the future, and can use it to pay for deductibles, co-payments, prescription drugs, over-the-counter medications, menstrual supplies, and other out-of-pocket expenses. Everyone with a high-deductible health insurance policy can benefit from building up tax-free savings in an HSA.
YOUR ADVISOR IS STANDING BY
Consider getting extra help toward financially thriving post-pandemic. With so many changes to your taxes and your finances, this may be the year to get extra help from a financial planner. A fee-only fiduciary financial advisor can offer expert tax planning as well as help you set your financial goals and priorities – so you can take advantage of all of the tax breaks you deserve and make the most of your financial-planning opportunities.
MORE ON HERMONEY:
- Your Guide to Bulletproofing Your Finances in 2021
- HerMoney Podcast: Here’s How to Qualify for Special 2020 Tax Breaks
- Consider A 401(k) Roll Over? It May Be Time to Hire a Fee-Only Financial Advisor
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