Tips on buying health insurance outside an exchange

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There are a number of reasons why you might want to buy health insurance outside the marketplace. Let’s discuss the advantages of buying health insurance off exchange in detail.

The Affordable Care Act, also known as Obamacare, requires most Americans to enroll in a health insurance plan or face steep penalties.

Many Americans get their health coverage through their job or the government-run online health care marketplace, but health insurance exchanges aren’t the only option. You can also buy individual health insurance outside your state’s marketplace, which is sometimes called an exchange.

People who qualify for subsidies may be enticed into buying from the marketplace — if your plan isn’t from the marketplace, you won’t get your tax credits and subsidies to reduce health costs. But, for everyone else, the free market awaits.

Key Takeaways

If you are ineligible for government subsidies, you may find the widest choice for health insurance plans outside your state’s health insurance marketplace.
You can access a larger health insurance network if you purchase a health plan outside the Marketplace.
Prescription drug coverage benefits can be more robust outside health insurance exchange plans.

What is an off-exchange health insurance plan?

Off-exchange health insurance is a plan you can purchase directly from an insurance company or through an insurance agent or broker outside the state’s health insurance marketplace.

Can I buy health insurance outside the marketplace?

Yes, you can buy health insurance outside the marketplace. Most insurance companies that offer health plans through the marketplace also offer policies outside the exchange. Even if you purchase a health plan outside the marketplace, the cost of the insurance plan will remain the same as it is for people purchasing health plans on exchange.

If you are buying a health insurance plan that is not offered through the Marketplace, you will not be able to get premium tax credits or save any money based on your income.

What are the advantages of purchasing a health plan outside the marketplace?

One of the main objectives of the health insurance marketplace is to make health plans more affordable and accessible to people. However, health plans purchased outside the marketplace may also offer the same benefits.

In addition, health plans outside the marketplace may have more flexible coverage options. As a result, purchasing a plan outside the marketplace can be a viable option for some people.

Here are some advantages of getting a health insurance plan outside the marketplace:

Greater choice off-exchange
More providers in the network
Variation in deductibles
Off-exchange health plans cover more prescription drugs

Buying health insurance outside the Marketplace

The main reason for buying off-exchange is a greater choice, says Peter Freska, a benefits consultant with The LBL Group in Los Alamitos, CA.

Health insurance companies offer many health plans that aren’t available through the exchanges.

Under the Affordable Care Act, all plans must offer 10 essential benefits, inside and outside exchanges. But if you’re looking for a specific set of benefits beyond that, shopping off-exchange could give you a wide range of choices and the opportunity to better tailor a policy to your needs.

See Insure.com’s best health insurance companies.

Do I get more choices of healthcare providers outside the Marketplace?

Another reason to shop for your health insurance off-exchange is the network of healthcare providers included in the plan. In some cases, health insurance companies control their costs by limiting the provider networks for exchange plans.

So, you might have trouble finding a preferred provider organization (PPO) plan on the marketplace. Instead, you might be limited to health maintenance organization (HMO) and exclusive provider organization (EPO ) plans, which have restricted provider networks.

“But if you shop off-exchange and ask an agent to review all options available, you would have many different plans from which to choose at that metal level,” Freska says.

Your preferred doctor or hospital may not be included in the plan that looks best to you on the exchange. Some health plans, such as EPOs and HMOs, won’t provide coverage if you go outside of their networks for care; others provide only limited coverage, certainly less than you would get if you go to providers in the network.

Buying off-exchange can give you access to larger provider networks.

Insight: “If you’re someone who has a chronic condition or specialist that you appreciate, it is important to make sure that the doctor or hospital is part of the network of any health plan you choose,” says Kevin Coleman, head of research and data for HealthPocket, Inc. of Sunnyvale, CA.

How does health insurance deductible work outside the exchange?

Off-exchange plans also may give you a greater choice when it comes to deductibles, which is the amount you pay out of pocket before your plan begins to pay.

A HealthPocket study showed a great variation in deductibles of the different tiers of plans available on and off exchanges. When deciding on a plan, you have to consider not only the monthly premiums but also the deductibles, Coleman says. If you use a lot of health services and choose a plan with lower monthly premiums but a high deductible, you could end up paying much more out of pocket than you planned.

“When you are comparing plans on and off the exchanges, you have to sweat the details,” he says.

Do health insurance plans purchased off-exchange cover prescription drugs?

You may find you have more options when it comes to drug coverage if you shop off exchange. Like provider networks, health plans can limit the drugs that are covered, reimburse more for generics than brand names, or reimburse more for drugs you purchase via mail-order rather than from your local pharmacy.

If you have a health condition and use a particular drug, you should check that it’s covered under the plan you want to enroll in, whether that plan is on the exchange or off-exchange, Coleman advises.

Remember, too, he says, that the cap on out-of-pocket expenses doesn’t apply to drugs that are not on a health plan’s list of covered medications.

Do all health insurance companies offer plans through the marketplace?

Some health insurance companies have opted not to participate in the ACA marketplace. If you prefer these companies for your health coverage, you will have to buy plans from them outside the marketplace.

Coleman says that even if you qualify for a subsidy, it may not be large enough to make it worthwhile to buy from an exchange. Because premium subsidies are calculated on a number of factors including income and age, for some people, the subsidy may not be large enough to make it worthwhile to buy from the exchange. If that’s the case, you may find a more affordable off-exchange health plan option.

The bottom line, Coleman and Freska agree, is that you need to shop both on-exchange and off-exchange — compare costs, deductibles, plan types, provider networks, and drug coverage.

How to buy outside the marketplace

Insure.com provides a comprehensive list of the best health insurers as surveyed by actual policyholders. You can learn about which companies might suit your needs and obtain quotes on varying plans. You could also contact an independent agent in your area.

Shop before the open enrollment period ends. After that, you can only shop the exchanges if you have a qualifying life event, such as a marriage or loss of job-based coverage, which creates a special enrollment period.

Shivani Gite

Contributing Writer

Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions.