How To Get Free or Low-Cost Health Insurance—a Beginner’s Guide

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How To Get Free or Low-Cost Health Insurance

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If you’re new to health insurance in the United States, you’ll find it’s expensive. But cost isn’t the only problem for beginners trying to get health insurance. It’s also a complex system with multiple entry points. Since you can potentially get health insurance from many different sources, for example, the government, from your job or university, or from a private insurance company, it’s not always clear where you should start looking when shopping for low-cost health insurance.

Before discussing your options for free or low-cost health insurance, understand one thing: health insurance is never really free and is rarely truly low-cost. Health insurance that’s free or low-cost to you means one of two things

  • Someone is subsidizing the monthly premiums so that you’re not paying the full cost yourself.

  • The benefits have been reduced so the coverage you’re buying isn’t comprehensive health insurance; it’s less robust coverage.

Next, you’ll find several options for free or low-cost health insurance, along with a description of who is eligible, how to apply, and what to expect.

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Free or Low-Cost Health Insurance Option 1: Medicaid

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Medicaid is a social welfare program that provides comprehensive government-based health insurance to low-income people. Medicaid is free health insurance for those who qualify. In most cases, there are no monthly premiums, and there is no or minimal cost-sharing in the form of deductibles or copayments.

Medicaid works slightly differently in each state, but to be eligible, you must meet low-income guidelines. In many states, you’ll qualify for Medicaid if your income is 138% of federal poverty level or less. However, some states have stricter eligibility criteria. In those states, you must meet low-income guidelines and also be a member of a medically vulnerable group such as a pregnant woman, an elderly person, blind, disabled, or a child.

Medicaid may be available to immigrants who have been legally residing in the United States for five years or more if they meet eligibility requirements. Medicaid isn’t usually available to undocumented immigrants, although there may be exceptions such as short-term limited Medicaid coverage in emergency situations, and emergency coverage for pregnant women.

Medicaid is paid for by federal and state taxes. If you get Medicaid, your friends, neighbors, and fellow citizens are paying for your health care with their tax dollars. Although Medicaid is government health insurance, the vast majority of care provided to Medicaid recipients is provided by private businesses and health care providers. If you get Medicaid, you’ll likely be cared for at the same hospitals and by the same physicians as your neighbors with private health insurance are.

You can apply for Medicaid through your Affordable Care Act health insurance exchange or by contacting your state’s Medicaid program directly.

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Free or Low-Cost Health Insurance Option 2: Short-Term Health Insurance

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Short-term health insurance frequently costs less than comprehensive health insurance. For this reason, it’s an attractive option to some people looking for temporary coverage. Short-term plans are available for up to six months of coverage. They cannot be renewed. In some states, you may buy another 6-month short-term policy immediately after your first one expires, essentially giving you one year of coverage. In other states, you’re not allowed to buy back-to-back short-term health insurance plans, so you’ll be limited to a maximum of six months of coverage.​

Although short-term health insurance can be a low-cost health insurance option, it isn’t right for everyone. For one thing, it doesn’t satisfy the Affordable Care Act’s requirement to have comprehensive health insurance, so it won’t help you avoid the tax penalty for being uninsured.

Additionally, short-term health insurance plans don’t have to follow all of the Affordable Care Act’s rules. For example, a short-term health insurance policy can place a cap on benefits, limiting the insurer’s potential losses if you become seriously (and expensively) ill while you’re covered. Short-term health insurance doesn’t have to cover all of the essential health benefits. For example, it might not cover maternity care or birth control.

Insurance companies can put applicants for short-term health insurance through the underwriting process, so you’ll be charged more if you have a pre-existing condition. You can even be turned down for coverage entirely if the insurer feels you’re too big of a risk to insure. However, if you’re young, healthy, and pose little risk of expensive claims for the insurer, short-term health insurance can be a surprisingly low-cost health insurance option.

You can buy a short-term health insurance policy directly from a health insurance company, use your own insurance agent, find a health insurance agent or broker at the National Association of Health Underwriters website, or use a non-governmental private online exchange such as ehealthinsurance.com. However, short-term health insurance is not sold on Affordable Care Act health insurance exchanges such as HealthCare.gov.

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Free or Low-Cost Health Insurance Option 3: Obamacare Subsidy

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The Affordable Care Act provides for government subsidies to make buying health insurance less expensive for people with modest incomes, and help make both buying and using health insurance less expensive for people with low incomes.

If you have an income between 100% and 400% of federal poverty level, you may qualify for the premium tax credit subsidy. If you receive this subsidy, the government pays part of your monthly health insurance premium, and you pay the rest of it.

If your income is between 100% and 250% of federal poverty level, you’ll not only get government help paying for health insurance, you may also get additional government help paying your deductible, copays, and coinsurance when you use your health insurance. This is known as the cost-sharing reduction subsidy.

These subsidies can only be used to buy Obamacare health insurance sold on the Affordable Care Act’s health insurance exchanges, also known as the Marketplace. They can’t be used to help pay for health insurance through your job or a health plan purchased off of the Marketplace. Obamacare subsidies aren’t available to undocumented immigrants. However, most legally-residing immigrants can apply. Learn more about immigrants and Obamacare from HealthCare.gov here.

If you’re a legal resident, you can apply for a health insurance subsidy and enroll in a health plan on the health insurance exchange run by your state or by the federal government. Locate your state’s health insurance exchange using this tool.

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Free or Low-Cost Health Insurance Option 4: Job-Based Health Plan

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Many employers in the United States subsidize health insurance for their employees and their employees’ families as part of the employee’s benefits and compensation package. This is very common for full-time employees of large companies. It’s not as common for part-time employees or for employees of small businesses.

Here’s how it works. When you get a job that comes with health insurance benefits, you have a limited period of time to sign up for the health insurance your employer offers. If you don’t sign up before the deadline, you’ll have to wait until the next annual open enrollment period.

Your employer may offer only one health plan, or it might offer several options from which to choose. Once you enroll in the company-sponsored health plan, there’s a short waiting period before your coverage begins. This is usually from 30-90 days.

When you have employer-sponsored health insurance, your employer usually pays part of the monthly premiums and you pay part of the monthly premiums. Your share of the premiums are deducted from your paycheck automatically so you don’t have to remember to pay each month. In most cases, this payroll deduction is taken out of your paycheck before your income taxes are calculated; this way, you’re not paying income taxes on the money you spent on health insurance premiums.

Unlike Obamacare plans, with job-based health insurance, your employer doesn’t usually help you pay cost-sharing expenses like deductibles, copays and coinsurance. However, employers may offer savings plans  like Flexible Spending Accounts, Health Savings Accounts, or Health Reimbursement Arrangements to help make paying these expenses easier.

In most cases, when you quit or lose your job, you also lose your job-based health insurance coverage. However, you may be eligible to continue this coverage for 18 months through COBRA continuation coverage if you’re willing to pay both your share of the premiums and the part of the premiums your employer had been paying.

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Free or Low-Cost Health Insurance Option 5: Spouse's Health Plan

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If your spouse has job-based health insurance, you may be eligible for the same coverage. Many employers extend the offer of job-based health insurance to their employees’ spouses, children, and step-children. You must sign up for this coverage during the initial enrollment period when your spouse first gets his or her job. If you miss this opportunity, you’ll have another opportunity during each annual open enrollment period.

If your spouse’s employer offers the company health plan to you and your children, you’re not obligated to accept it. If you can find a better deal on health insurance coverage for you and the kids, it’s OK to let your spouse’s employer cover your spouse only, while you and the kids opt for other coverage.

Although employers generally subsidize an employee’s job-based health insurance by paying a portion of the monthly premiums, the employer might not subsidize spousal or family coverage. If your spouse’s employer offers health insurance to his or her family members, your share of the premiums will be deducted from your spouse’s paycheck automatically.

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Free or Low-Cost Health Insurance Option 6: Parent's Health Plan

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If you’re less than 26 years old and your parent has job-based health insurance, Obamacare, or privately-purchased comprehensive health insurance, you’re eligible for coverage under your parent’s health plan even if you’re not your parent’s tax dependent, you’re married, or you’re living on your own.

You may have to wait until the next open enrollment period with your parent’s health plan to be added to your parent’s health insurance coverage. However, if you’ve recently lost other comprehensive health insurance coverage, you might be able to enroll even before open enrollment if you meet the health plan’s requirements for a special enrollment period.

Some employers subsidize not only their employees’ health insurance but also health insurance coverage for employees’ families. Other employers pay a portion of their employees’ health insurance premiums but don’t subsidize the premiums for family members.

If your parent has job-based health insurance and his or her employer subsidizes family premiums, your health insurance premiums will be paid in part by your parent’s employer. The rest of the monthly premium will be taken out of your parent’s paycheck. If your parent’s employer doesn’t subsidize family coverage, your entire monthly premium will be deducted from your parent’s paycheck.

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