Free or nearly free health insurance is now attainable for millions of low-income Americans under a provision of the Patient Protection and Affordable Care Act.
Depending on your income, age and location, you may qualify to receive an "advanced premium tax credit," also called a subsidy. This subsidy can only be used to reduce the costs of a plan purchased through official health insurance exchanges.
But how does this make an Obamacare plan “free”? According to a November 2013 study by Wall Street analysts, those subsidies will be large enough to pay for the entire monthly premiums of up to 7 million Americans.
These low-cost Obamacare policies are typically the bronze health plans, which cover 60 percent of most health care costs -- the lowest percentage in the lineup of platinum, gold, silver and bronze tiers.
"The (flip) side is that the bronze plan is going to cost more out of pocket should you need additional care," says Jennifer Ng'andu, head of health and civil rights policy projects at the National Council of La Raza, a consumer advocacy group. "You could be gambling on your health care costs."
Health care policy experts say you should carefully weigh the benefits and drawbacks to see if a low-cost plan is a good fit for you.
Do you qualify for a low cost or free health insurance plan
First, you need to determine whether you qualify for a subsidy. Use insuranceQuote.com's subsidy calculator to find out how much it will be.
If you find that your subsidy is $300, for example, and you want a free premium, use your subsidy on a marketplace plan that costs less than $300. If you choose a plan that costs more than your subsidy, depending on your income, you may be expected to contribute toward your monthly premium.
A person who makes $15,200 per year, for example, would be expected to contribute 3 percent of his income, or $38 per month. This income-dependent contribution is used for any plan purchased in an exchange. You can also choose a plan that costs more than your subsidy and your contribution combined, and you’d cover the extra cost.
Cons of the lowest-cost plans
Bronze policyholders pay 40 percent of health care costs through deductibles, coinsurance and copayments, and they may also be on the hook for a large deductible. Annual out-of-pocket costs for all plans can't exceed $6,250 for an individual or $12,700 for a family. However, that can amount to quite a large chunk of income.
To deflect high costs, more help is available. People who make 250 percent or less of the federal poverty level may qualify for extra financial assistance through "cost-sharing" subsidies. But there's a catch: You must choose a silver-tier plan to get this help. In that scenario, the tax-credit subsidy may not be enough to pay for a silver-tier premium.
Julia Hutchins, Colorado HealthOP's CEO, advises people to consider whether they'll need a lot of health care in the next year or have ongoing needs. Think about the worst-case scenario, she says.
"Would you be able to afford the care under the plan that you're choosing? If the answer is 'no,' that might not be the best plan for you," Hutchins says.
Benefits of the lowest-cost plan
Because of the high out-of-pocket costs, some may think the bronze plans aren’t worth buying. But Ng'andu disagrees.
The cheapest plans on the marketplace will still include all essential benefits such as maternity care, certain prescription drugs and treatment for long-term diseases. The plans will also cover preventive care for free, such as vaccinations, mammograms, screenings for several diseases and conditions, and well-woman visits.
By taking advantage of these services, policyholders "mitigate health risks that could potentially affect them," Ng'andu says, "because they're getting the types of screenings and types of treatment that help prevent health conditions or help to maintain more serious conditions."
The bronze plans stand to most benefit young, healthy people. They'll be a huge boon to anyone who would be driven to high levels of debt or bankruptcy if they needed medical care and didn't have any insurance, Ng'andu says.
Alternatives and points to consider
If you're younger than 30 or qualify for certain hardship exemptions, you can also consider buying a "catastrophic" plan, where you'll pay all medical expenses up to a certain amount in exchange for a low premium. However, you can't use a subsidy to offset the costs of a catastrophic plan.
Glenn Melnick, health policy expert and University of Southern California professor, says these plans have merit especially for young, healthy people who won't use insurance frequently and might not qualify for a subsidy.
If you have no health insurance and you end up in the ER, "you could get a $50,000 or a $100,000 bill that you could end up paying off for the next 10 years", Melnick says, adding that he encourages his students to sign up for catastrophic plans at the very least.
Some people may need more coverage than a bronze or catastrophic plan can provide -- such as those who have ongoing health problems or partake in dangerous hobbies and work-related duties. You can direct your subsidy toward silver-tier or gold-tier plans, which cover 70 percent and 80 percent of costs, respectively.
No matter what you choose, Hutchins recommends people thoroughly research the health care plan they're eyeing before signing up for it. "Make sure you know what benefits you're getting," she says, adding that many plans offer unique opportunities. For example, Colorado HealthOP's plans offer incentives such as prescription discount cards and rewards based on taking surveys or making healthy lifestyle choices.
Ng'andu agrees people should educate themselves on health care. "We need to encourage a culture of health," she says, "so that people are doing what is within their power to get healthy."