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Out-of-Pocket Maximum Explained

Medical bills can be a huge source of stress. They can seem like they are never ending, but there is actually a limit on how much you can spend on out-of-pocket healthcare costs. The out-of-pocket maximum, which is the annual limit that you are required to pay for covered health services, is your financial saving grace. Each health insurance plan has different out-of-pocket maximums. Understanding yours will help you get a better handle on how much you will be paying out-of-pocket with your policy. 

What Is an Out-of-Pocket Maximum?caucasian mans hand pointing at the end of a br that says maximum

An out-of-pocket maximum is the amount that you will have to pay for covered health services. Once you reach that amount, your insurance will pay for all covered services. All copayments, deductibles, and coinsurance count towards your out-of-pocket maximum. However, your  monthly premium payments do not go towards your out-of-pocket maximum. 

How It Works

If you need a medical procedure, generally you and your  insurance company will each pay a portion of the cost. You will pay enough to meet your annual deductible, and your insurance company will pay for the rest of the procedure, unless you have to pay coinsurance as part of your policy. If your plan does require you to pay coinsurance then you will also have to pay 20% (usually) of the cost of the procedure, even after meeting your deductible.

After you have met your deductible, you will continue to pay copays and coinsurance until you meet your out-of-pocket maximum. After you meet your maximum, insurance will then pay 100% of any medical costs. You will not have to pay for copays or coinsurance after meeting your maximum. 

calculator on paper with a pen sitting on top of it in the paper.
After you have met your deductible, you will continue to pay copays and coinsurance until you meet your out-of-pocket maximum.

Here’s an example to illustrate how out-of-pocket maximums work. Let’s say Mary has a health insurance plan with a $2,000 deductible, a 20% coinsurance requirement for all care after meeting the deductible, and a $5,000 out-of-pocket maximum. She has to have surgery and the total hospital bill is $20,000. The costs will break down like this:

  • Mary will pay her $2,000 deductible, leaving $18,000 of the bill. 
  • Her coinsurance requirement is 20% of the $18,000, which is $5400. But because Mary’s plan has an out-of-pocket maximum, she and her insurance company will end up each paying part of this cost.
  • Mary has already paid $2,000 to meet her deductible, and her out-of-pocket maximum is $5,000 so instead of owing $5,400 in coinsurance payments, she only owes $3,000 ($2,000 deductible + $3,000 coinsurance = $5,000 maximum out-of-pocket payment). 
  • Her insurance company will now cover the remaining $13,000 of the cost of the procedure.

Do All Plans Have a Maximum?

All plans that meet ACA standards have out-of-pocket maximums. For 2020, that number is $8,2000 for individuals and $16,400 for families. Some plans may have a lower maximum, but none will be higher than those amounts. Plans with higher monthly premiums generally have lower out-of-pocket maximums, while plans with  lower monthly premium plans, like  catastrophic or high-deductible health plans, have higher out-of-pocket maximums. 

In order to find the right plan for your needs and budget, you have to take into account everything that it has to offer, including things like out-of-pocket maximums. Doing all the research alone is time-consuming and can cause confusion and missed opportunities. EZ will make the process quick and painless; we’ll explain everything clearly, give you real-world examples of how the plan would work for you, compare quotes, and calculate costs for you. We will set you up with one agent that will help you find the right plan for your medical and financial needs. To start saving, enter your zip code in the bar above, or to speak to one of our licensed agents, call 888-350-1890.

Qualify For A Special Enrollment Period? Find Out What Documents You Need

The Affordable Care Act (ACA) changed a lot of things about the way healthcare works in the U.S. One of the changes it made was to create an open enrollment period for everyone shopping for a health insurance policy on the Marketplace. In most cases, you can only enroll in a health insurance plan, or change your plan, during this period, which runs from November 1 to December 15. If you miss open enrollment, then you cannot enroll in a plan, unless you have what is known as a qualifying life event. Experiencing one of these life events opens up a Special Enrollment Period (SEP) for you, meaning that you will be able to sign up for a new plan. Different types of qualifying life events require you to produce different documentation proving your eligibility for a SEP.

Qualifying Life Events

illustration of people moving with a truck and boxes and people carrying boxes.
One of the qualifying life events is moving to another county or state.

A Special Enrollment Period is only available to those who have a qualifying life event, including:

  • Change in residence (moving to different zip code or county)
  • Change in household size (having a baby or adopting a child, getting married, or getting divorced.)
  • Loss of health insurance (losing employment, turning 26 and getting kicked off of a parent’s plan, or death in the family.)
  • Changes in income

The Different Documents Required

If you lose health insurance or need a new plan, and you want to use a Special Enrollment Period to shop for a new plan, you will generally be notified of what documents are needed in your Eligibility Results Notice. You will then have 30 days to submit these documents by mail or by uploading them to healthcare.gov. There are different forms of documentation required depending on the life event.

For change in residence you will need to have moved in the past 60 days and have had health insurance at least one day in the 60 days before your move. To prove this, you will need to submit:

  1. Documents proving that you moved, such as rental agreements, mortgage bills, or utility bills, as well as documents proving your new address and the date of your move.
  2. Documents proving you had insurance prior to your move, such as a letter from an insurance company or employer.

For change in household size you will need:

  1. Legal or government-issued documents of an adoption or a birth certificate
  2. Marriage license or certificate.
  3. Divorce certificate.

For loss of health insurance you must show that you had qualifying health insurance coverage in the past 60 days and that you will be losing coverage in the next 60 days. You will need:

  1. A letter from your insurance company showing termination date.
  2. A loss of health insurance coverage letter from your employer.

For change in income, you will need:

w2 form

  1. Proof of a reduction in income which makes your current plan unaffordable for you, such as a past and current paycheck or W-2 forms.

Special Enrollment Period Coverage

After you submit your documentation and prove that you qualify for a Special Enrollment Period, you can get on the Marketplace and pick a health insurance plan. Coverage for your new plan will either begin the first day of the month after you pick your plan or the first day of the second month after you pick your plan, depending on the qualifying life event. Some types of coverage will be active sooner than others; for example, if you have a baby or adopt a child, coverage is retroactive to the date of the birth or adoption, as long as you pick a plan within 60 days.

Need Help?

If you still have questions on how this all works, contact one of our agents. Our highly trained agents will take the time to talk with you, and will go over all of your documents for you as well as thoroughly explain all of your options. Once you are ready to enroll, they will search through all the plans in your area and find the right plan for you, making sure the plan fits your needs and budget. EZ always provides you with your own personal agent, so there’s never any need to worry about bouncing around from agent to agent or getting hassled by endless sales calls. To get started, enter your zip code in the bar above, or to speak to an agent directly, call 888-350-1890.

Can You Get Health Insurance at Any Time?

If you are unhappy with your current health insurance policy, then it might be time to shop for a different plan. But can you purchase a new plan at any time? Yes, and no. For marketplace plans, once the open enrollment period (November 10 to December 15) is over, you generally cannot get a new plan. The open enrollment period for employer-based insurance might be at a different time of year, but you will still only be able to change your plan during that enrollment period. In most cases, if you want to get health insurance or change your plan outside of the open enrollment period, you will need to qualify for a Special Enrollment Period (SEP). SEPs open up when you experience what is known as a qualifying life event. 

Qualifying Life Events

caucasian couple hlding a baby girl in the middle while both are kissing each cheek
You can get health insurance outside of open enrollment if you qualify for SEP such as getting married or having a baby.

You have 60 days to change your plan if you:

  • Got married
  • Had a baby, adopted a child, or took in a foster child
  • Got divorced or legally separated. However, if you do not lose coverage due to divorce or legal separation, then you do not qualify for a Special Enrollment Period.
  • Had someone on your marketplace plan die
  • Changed residence. If you move to a new home in a new ZIP code or county, move to attend school, are a seasonal worker and move between job and home, or move from a shelter or other transitional housing to a permanent residence, you will qualify for an SEP.
  • Lost your health insurance. This includes losing job-based coverage, losing a plan you bought yourself, losing eligibility for Medicaid or Medicare, and losing coverage through a family member.
  • Gained membership in a federally recognized tribe or status as an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder
  • Became newly eligible for Marketplace coverage because you became a U.S. citizen
  • Left incarceration
  • Started or ended service as an AmeriCorps State and National, VISTA, or NCCC member

Short-Term Medical Plans

If you do not qualify for any of the life events listed above, all hope is not lost. You can enroll in a short-term medical plan. Short-term health insurance provides fast, flexible insurance with many benefits. These plans can be extended up to 3 years, and you can pick your deductible amount from many options. You are also able to drop coverage without a penalty if you want to change to a long term insurance option. Premiums are lower than ACA health insurance plans, and you get coverage as soon as a day after applying.

short-term health insurance form on a clipboard

It is important to understand that short-term insurance is temporary and not ideal for those who require more comprehensive coverage or have health conditions. Short term plans are not guaranteed-issue, meaning they do not cover pre-existing conditions. They only cover the basics.

Do you qualify for a special enrollment period? If not, are you considering a short-term health insurance plan to hold you over until open enrollment begins? EZ.Insure can help. We offer accurate health insurance quotes based on your specific region, free of charge. That’s right. We will provide you with an agent who will compare all available plans for you, and help you choose a health insurance plan that is based on your health needs and budget, for free. To get your free quotes, simply enter your zip code in the bar above, or to speak to an agent, call 888-350-1890.

Are Health Insurance Premiums Tax-Deductible?

Some people are unaware  of all the tax deductions available to them, and might be missing out on great tax-savings opportunities. Remember, the more you can deduct, the better your income tax refund check will be. Medical bills can add up to a lot of money spent throughout the year, and are often overlooked as a tax deduction. But are health insurance premiums tax deductible? It depends on if you meet certain qualifications.

Employer’s Insurance

When you have a health insurance plan through an employer, your premiums are most likely already tax-free. In other words, you will not be able to write off your health insurance premiums. 

caucasian man sitting in front of a lptop with money going into a suitcase on the screen,
Most self-employed individuals can take a deduction for health insurance premiums.

Self-Employed Insurance

Most self-employed individuals can take a deduction for health insurance premiums they pay for themselves and their dependents. So, if you own your own business, you can deduct the entirety of your premium payments. You can only do so as long as you are not eligible to get insurance from another employer’s plan. 

The deduction for self-employed people is limited by the amount of your business income. You cannot deduct more than the amount of income your company makes.

figure sitting on top of "10%" sign
You are allowed to deduct any unreimbursed healthcare expenses you paid for yourself or your family, as long as it is 10% your adjusted income.

Self-employed people can deduct health insurance premiums directly on Form 1040 (Line 29 on returns). You deduct all other qualified medical expenses on Schedule A, Line 1.

The 10% Rule Of Medical Deductions

Whether you are on an employer’s insurance or your own, you can itemize medical expenses when you are doing your taxes, but there are some rules. The main rule is the 10% rule. If you paid for insurance on your own using after-tax dollars, then you can deduct some of your premiums paid. You are allowed to deduct any unreimbursed healthcare expenses you paid for yourself or your family. However, you can only do this if it is greater than 10% of your adjusted gross income. 

So, you can deduct premiums paid, and out-of-pocket costs such as doctor visits, deductibles, surgeries, and dental and vision care. If your income for the year was $40,000, then you can deduct qualified expenses that exceed $4,000 (10% of your income). If your medical expenses were, for example, $7,000, then you can deduct $3,000 from your taxable income.

To reiterate, generally if you have your employer’s insurance plan, then you are paying for premiums tax-free already. This means that you cannot deduct health insurance premiums. But, you are eligible to deduct them if your total healthcare costs go over 10% of your adjusted gross income, or if you are self-employed.

Do You Qualify For The Small Business Health Care Tax Credit?

If you offer health insurance to your employees, it can be costly, but luckily there is a silver lining- the small business health care tax credit! One of the provisions of the Affordable Care Act, ACA, is the Small Employer Health Care Tax Credit which allows certain businesses to save money while offering health insurance to their employees. While it is a great financial saver for businesses, not all businesses can get the tax credit. There are some qualifications that a small business must meet in order to get the health care tax credit.

a list with 3 checkmarks and a pencil next to it insude a blue circle.
You must meet certain qualifications in order to receive a tax credit.

 

The Small Business Health Care Tax Credit

This credit allows small businesses to receive a tax credit for paying at least half of their employees health insurance premiums. In the beginning, the small business health care tax credit was not much, ranging only 35% of eligible health insurance premiums. But luckily, over the years it has changed. The tax credit now equates to up to 50% of employer-paid health insurance premiums. 

cartoon figure sitting on top of "50%" numbers
The tax credit now equates to up to 50% of employer-paid health insurance premiums. 

Small business owners cannot take the tax credit for insurance premiums paid on their own behalf. This includes partnerships, and sole proprietors. 

Qualifications

In order to qualify for the health care tax, a business must meet the following criteria:

  1. Have fewer than 25 full-time employees.
  2. Your average employee salary must be less than $54,000 as of the 2019 tax year. 
  3. You pay at least 50% of your full-time employees health insurance premiums, also known as a “qualifying arrangement.”

Flexible Credit

An advantage of having this kind of credit is that it is flexible. It can be carried toward the next year, or back to other tax years. So, if your business does not owe tax in a certain year, then claiming the tax credit will not do you any good. However, if you owe tax for a prior year, you can apply your credit to that. Or you can choose to keep the tax credit and save it for next year.

Claiming the Tax Credit

The health care tax credit can be calculated and claimed using the Form 8941. The form must be attached to the business’s tax return, and then after it is processed, the credit reduces any income tax the business owes.

Tax-exempt organizations should file Form 990-T. This tax credit is non-refundable, although it can be carried towards either the following or prior tax years. Also, tax-exempt organizations that have no taxable income can qualify for a refund of the credit, as long as it doesn’t exceed their Medicare tax liability and income tax withholding.

calculator and pen on top of a sheet with numbers on it.
If your business does not qualify for the tax credit, there is still hope on saving money with tax deductions.

Small Business Tax Deductions

If your business does not qualify for the tax credit, there is still hope on saving money. There is a deduction for employee premium payments. Some businesses may be able to get both the deductions and tax credit!

The small business health care tax can help a small business offer their employees health insurance without fearing the great costs. As long as you meet the qualifications to receive the tax credit, then you will be eligible. The fewer employees you have, for example, less than 10 full-time employees who are paid an average of $25.000 or less will get you a bigger credit. And if you do not qualify for the tax credit, at least you can get deductions!

If you are looking to provide health insurance to your employees and want to save money, EZ.Insure can help. We will find a plan that meets your needs financially. We will find the plan that gives you deductions and notify you on whether you qualify for both deductions and the tax credit. Our goal is to save you as much money, while providing you with the best plan. Call 888-350-1890, or email us at [email protected] to speak directly with one of our agents, or enter your zip code in the bar above to get free instant quotes. We will never sell your information to telemarketers as others do.

Self-Employed? Here’s Your Guide To Getting Health Insurance

Nothing beats being your own boss! If you are self-employed, then you are probably wondering about your health insurance options. Don’t worry, you do not have to break the bank to get a plan for yourself. There are many affordable options.

silhouette of a man looking at a blackboard with 3 arrows pointing in different directions
When you are self-employed, you have different options for health insurance.

Health Insurance Coverage Options

Let’s talk about the options of health insurance for the self-employed. There are different routes to go when looking for the right plan.

  • Marketplace– If you work as a freelancer, run your own business, or self-employed without employees, then you qualify for the Individual Marketplace. There are a variety of different plans you can choose from, but you can only enroll during the annual Open Enrollment Period, unless you have a qualifying life event. When you fill out an application, you will find out if you qualify for premium tax credits and other savings, which we will further elaborate on later. 
  • Private Insurance– Private insurance has plans that provide good coverage at an affordable rate. Private insurance companies have many plans to choose from with a variety of coverage and costs. You can find a plan tailored to your needs and budget.
  • SHOP Marketplace– If you own a business and are looking for coverage for yourself, a spouse, or have an employee, then Small Business Health Options Program (SHOP) Marketplace is the way to go. Enrolling in a SHOP plan offers small business or non-profit a Small Business Health Care Tax Credit.

Marketplace Savingsafrican american hands holding a small white piggy bank

Now back to those savings we talked about earlier. When you fill out a health insurance Marketplace application, you will estimate your net self-employment income. The premium tax credit or reduction qualifications rely on the year you’re getting coverage, not the prior year’s income. You will have to estimate your household income for the year and submit it. During the year, you can change your estimated income if the income changes. 

If you qualify for the tax credit, you are allowed to deduct 100% of your health insurance premiums for your adjusted gross income every year. 

Tips On Choosing A Plan

caucasian woman n a sundress with a laptop on her lap and a notebook on the seat next to her.
Before choosing a plan, make sure to do some research, so you pick the best plan for your situation.

There are a lot of different plans you can choose from, both on the marketplace and through private health insurance companies. You can choose a high deductible plan with lower monthly premiums, and benefit from an HSA account. You can choose a low deductible plan with higher monthly premiums, or even a catastrophic plan. Whichever you choose, make sure to compare plans to choose the one that meets your needs and budget. 

Comparing plans and their prices can take a long time, and can be frustrating. The most important tip when choosing a health insurance plan is getting expert advice from an insurance agent. EZ.Insure offers highly trained and knowledgeable agents all around the U.S. that specialize in their region. You can speak to one of our agents, and they will do all the comparing of available plans for you and provide you with the quotes. It comes at no cost to you, which is a win! You get free help, and get directed in the right path to save money, double win! To speak to an agent by emailing [email protected], or calling 888-998-2027. No gimmicks, no hassle, and no cost. Just simple, free health insurance quotes.

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