Why Private Health Insurance Can Beat ACA Plans for Healthy Individuals

If you're young, healthy and rarely see a doctor, there's a good chance you're paying for health insurance built for someone else. For many healthy people, a private, medically underwritten health plan offers the same peace of mind at a much lower monthly cost than an ACA Marketplace plan. Here's why, and how to tell if it's the right move for you.

When most people shop for individual health insurance, they head straight to the ACA Marketplace (also called "Obamacare" or HealthCare.gov). It's the option everyone has heard of, and for many households it's a great fit. But it isn't the only option, and for people in good health it often isn't the best value. Private health plans that sit outside the Marketplace can cost significantly less each month and still protect you from the big medical bills that can derail your finances.

First, what's the difference?

ACA Marketplace plans are "guaranteed issue." Everyone who applies during Open Enrollment (or a Special Enrollment Period) is accepted, and everyone in the same age bracket and area pays the same price, no matter their health history. Every plan must cover ten categories of essential health benefits, including maternity care, mental health services, pediatric dental and vision, and prescription drugs.

Private underwritten plans (sometimes called non-ACA plans, off-exchange medical plans or medically underwritten plans) work more like life insurance or car insurance used to work. You answer health questions when you apply, and the carrier prices your plan based on your actual risk. Depending on the plan type, they include short term medical plans, underwritten PPO plans and other private medical plans offered through licensed agents.

That single difference, whether the plan looks at your health, is what makes private plans so attractive for healthy people.

Why ACA premiums can feel high when you're healthy

Because ACA plans must accept everyone at the same price, the premium has to cover the expected costs of the entire pool. That pool includes people managing diabetes, heart disease, cancer treatment and other expensive conditions. It's a system designed to make coverage available to everyone, and that's a good thing. But it means a healthy 30-year-old who visits the doctor once a year is helping pay for the care of people with much higher medical needs.

On top of that, every ACA plan includes the full list of essential health benefits whether you need them or not. A single man pays for a plan that includes maternity coverage. A couple with no children pays for pediatric dental and vision benefits. Those benefits matter for the people who use them, but for many healthy individuals they're costs without a matching benefit.

Five reasons private plans can be the better fit for healthy individuals

1. Lower monthly premiums

This is the big one. Because underwritten plans price coverage based on your own health, healthy applicants often qualify for premiums well below unsubsidized Marketplace rates. Over a year, the savings can add up to hundreds or even thousands of dollars, money you can put toward savings, a health savings account or simply your monthly budget.

2. You only pay for the coverage you want

Private plans let you build coverage around how you actually use health care. If you don't need maternity coverage, you don't have to pay for it. If you want strong coverage for hospital stays, surgery and emergencies but are comfortable paying for routine visits out of pocket, you can choose a plan designed that way.

3. Year-round enrollment

ACA plans can usually only be purchased during Open Enrollment, which starts each November 1, unless you have a qualifying life event. Many private plans can be purchased any time of year, with coverage that can start in as little as a few days. That's especially valuable if you've just left a job, aged off a parent's plan, moved or missed Open Enrollment.

4. Broad national networks

Many Marketplace plans today are HMOs or EPOs with narrow, local networks. Some private plans use large national PPO networks, giving you more freedom to choose your doctors and hospitals, and to get care when you travel.

5. Subsidies may not help you much

The ACA's premium tax credits are based on household income. If your income is too high to qualify for a meaningful subsidy, you'll pay the full sticker price for a Marketplace plan. That's often exactly the situation where a private plan offers the biggest savings.

How the two compare

The trade-offs you need to know

A private plan is a great tool when it's the right fit, and the wrong tool when it isn't. Before you switch, make sure you understand these important differences:

• Pre-existing conditions may not be covered. Most underwritten plans exclude or limit coverage for conditions you had before the plan started. If you have an ongoing condition, an ACA plan is usually the safer choice.
• You can be declined. Because these plans are underwritten, the carrier can decline an application based on health history.
• Benefits vary from plan to plan. Some private plans have benefit limits, exclusions or coverage caps that ACA plans don't have. Always read the plan documents before you buy.
• Some plans are temporary. Short term medical plans are designed to bridge gaps, and federal and state rules limit how long they can last. These rules have changed several times in recent years and vary by state.
• No subsidies. If you qualify for a large premium tax credit, a subsidized ACA plan may actually be cheaper than any private option.
• State rules apply. A few states require residents to have qualifying coverage or pay a state tax penalty, and some private plans may not count. Availability of private plans also varies by state.

Who should stick with an ACA plan?

An ACA Marketplace plan is usually the better choice if you:

• Have a chronic or pre-existing condition, or take expensive ongoing medications
• Are pregnant or planning to start a family soon
• Qualify for a substantial premium tax credit or cost-sharing reductions based on your income
• Live in a state with its own coverage requirement, where a private plan wouldn't qualify
• Want the certainty that coverage can never be denied or limited because of your health

Who should consider a private plan?

A private, underwritten plan is worth a serious look if you:

• Are in good health with no major ongoing conditions
• Earn too much to receive a meaningful ACA subsidy
• Mostly want protection from large, unexpected medical bills
• Missed Open Enrollment and need coverage now
• Prefer a broad PPO network over a narrow local network

How to decide with confidence

The smartest approach is to compare both types of coverage side by side, using your real numbers. Here's what we look at with every client:

1. Your subsidy estimate. We calculate what you'd actually pay for an ACA plan after any tax credit.
2. Your health history. We discuss any conditions or medications that could affect eligibility or coverage on a private plan.
3. Your doctors. We check whether your preferred providers are in network.
4. Total yearly cost. We look beyond the premium to deductibles, copays and out-of-pocket maximums.
5. Your state's rules. We confirm which plans are available and whether any state coverage requirements apply.

Health insurance isn't one-size-fits-all. For many healthy people, a private plan can deliver real protection at a price that makes sense. For others, the Marketplace's guarantees and subsidies are worth every penny. The right answer depends on you, and that's exactly what our licensed agents are here to help you figure out.

This article is for general educational purposes and is not a guarantee of coverage, eligibility or pricing. Private underwritten plans are not ACA-compliant, may exclude pre-existing conditions and may not cover all essential health benefits. Plan availability, rules and benefits vary by state and carrier. Talk with a licensed agent about your specific situation.