In a Nutshell
Health insurance isn’t cheap, but going without it can cost you even more. Whether you get it through your employer or the Affordable Care Act Health Insurance Marketplace, know what you’re getting and what you aren’t.This article was fact-checked by our editors and reviewed by Christina Taylor, MBA, senior manager of tax operations for Credit Karma.
Health insurance isn’t cheap.
In fact, premiums have risen slightly every year for the past six years, according to a 2017 Employer Health Benefits Survey by Kaiser Family Foundation/Health Research & Educational Trust. If you’re in good health and don’t have anyone depending on you like a spouse or children, you may be tempted to forgo the cost of buying health insurance.
But not having health insurance can cost you far more in the long run than the cost of paying premiums. Without health insurance, you likely would be responsible for paying all costs if you get sick or injured. The more you know about health insurance and what it can — or can’t — do for you, the easier it is to realize that it might be worth the cost.
What health insurance typically covers
Whether you’re relatively healthy or chronically ill, health insurance can provide the financial protection you need for both routine and unexpected healthcare needs. Here are just a few benefits to consider:
- Health insurance typically covers preventive health services to keep you healthy and screen for potential health issues that could cause problems later on.
- Health insurance typically covers other essential health benefits like emergency services, prescription drugs and maternity care.
- Health insurance can help protect you from high medical costs, whether expected or not, through copayments and coinsurance.
If you choose to skip health insurance, you may be forced to face these costs alone, plus a penalty.
“The Affordable Care Act comes with a mandate for most individuals to have minimum essential coverage,” says Howard Yeh, founder and CEO of HealthCare.com. “Unless an exemption applies, individuals will have a tax penalty if they don’t get health insurance.”
That penalty can be calculated based on a percentage of your household income or per person in your household.
What health insurance might not cover
The coverages you may receive will largely depend on the type of health insurance plan you get and the insurance company you go through. For example, some health insurance plans cover vision and dental care needs, and some don’t.
Additionally, a health insurance plan might not cover health care that the insurer determines isn’t medically necessary. Essentially, that means the service is needed to prevent, diagnose or treat an illness, injury, condition, diseases or their symptoms.
Some examples of services that may not be considered medically necessary include:
- Cosmetic surgery
- Weight-loss surgery
- Acupuncture
- Infertility treatment
- Long-term care
The different types of health insurance
While health insurance can be regarded as a basic necessity, choosing a plan can be complicated. There are four main categories of health insurance in the Health Insurance marketplace:
Bronze
This type of plan usually costs the least in monthly premiums, but the most when you need healthcare. Your deductible — which is what you pay before your health insurance kicks in — can be thousands of dollars per year.
Silver
Both your premiums and healthcare costs with this plan are moderate. Deductibles can still be high, but not as high as with a bronze plan. According to a study by Avalere Health, this is the most popular type of plan in the marketplace.
Gold
These plans charge high monthly premiums but offer low costs when you use it. Your deductible is likely to be low.
Platinum
This type of plan has the highest monthly premium, but the cost of care and the deductible are usually very low.
How much does health insurance cost?
“Health insurance costs vary significantly by location and then by age,” Yeh says. “There are also different companies offering coverage in different areas with a different set of rates. Each additional person added to the policy, such as a spouse or child, will add to the calculation.”
Your cost will also depend on the type of plan you choose and if you use tobacco. But if you’re looking for averages, the Avalere Health study shows a list of averages for each state, as well as each category.
How does having health insurance affect your taxes?
As mentioned previously, skipping health insurance can result in a penalty. You pay that penalty when you file your tax return.
If you had health insurance during the entire year, though, you’ll get a form from your employer or through your HealthCare.gov account. This form provides evidence of coverage to avoid the fine.
Bottom line: Should I get health insurance?
The monthly cost of health insurance may be high even if you don’t go to the doctor often. But not buying health insurance because of the cost is a gamble that you might end up losing if you get injured or seriously ill.
“The biggest benefit is to have financial protection and the peace of mind of knowing that you can get access to affordable healthcare when you need it,” Yeh says. “You might be hesitant to see a doctor even when it’s medically necessary because you don’t want to or cannot pay for costs out-of-pocket.”
If your employer offers a health insurance plan, that’s likely your best bet to get affordable coverage. The federal government requires many employers to offer this benefit to their full-time employees. Some even help cover the cost of the monthly premium.
If your employer doesn’t offer a group health insurance plan, however, you can compare different plans at HealthCare.gov. Through this marketplace, you can view health insurance plans in your state that qualify under the Affordable Care Act. As you shop around, consider your healthcare needs and search for the policy that best fits those needs within your budget.
Christina Taylor is senior manager of tax operations for Credit Karma. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.