How to Get Free or Low-Cost Health Insurance

Medicaid

Medicaid is a social welfare program. It provides government-sponsored health insurance to low-income people. The insurance covers almost all medically necessary services, which means that it's comprehensive.

In most cases, Medicaid is free health insurance for people who qualify. A few states charge small premiums for people on the higher end of the Medicaid-eligible income scale.

In addition to no premiums, there is no or minimal cost-sharing (for example, deductibles or copayments).

Who Qualifies?

Medicaid works slightly differently in each state. To be eligible, you must meet low-income guidelines (depending on your eligibility category, you may also need to have low assets to qualify for Medicaid).

These guidelines vary depending on several factors including your age, whether you're pregnant, and whether you're disabled.

As a result of the Affordable Care Act's expansion of Medicaid, here is an overview of who is covered in most states:

• Adults under the age of 65 if their household income is no more than 138% of the federal poverty level (FPL)
• Some states have stricter eligibility criteria for adults under the age of 65. To qualify for Medicaid in those states, you must meet low-income guidelines and be a member of a medically vulnerable group (e.g. people who are pregnant, the parents/caretakers of a minor child, the elderly, disabled people, and children).
• Pregnant people and children (income limits for these populations are generally quite a bit higher than the income limits for non-pregnant adults)
• Disabled people and people age 65 and older, with lower incomes and few assets

As of 2024, there are nine states where being low-income by itself will not make you eligible for Medicaid if you're a non-pregnant adult. These states have not expanded Medicaid under the ACA, and thus have a coverage gap.

(Ten states have not expanded Medicaid, but Wisconsin does provide Medicaid to adults with income up to the poverty level, which means the state does not have a coverage gap.)

Can Immigrants Qualify?

Medicaid is generally only available to immigrants (who meet the income eligibility requirements) if they've been legally residing in the U.S. for five years or more.

But lawfully present immigrants can qualify for premium subsidies in the marketplace/exchange even if their income is below the poverty level. This ensures that low-income immigrants can still obtain affordable coverage while they wait five years to qualify for Medicaid.

Medicaid is not usually available to undocumented immigrants, but there can be exceptions. One example is short-term limited Medicaid coverage in an emergency or emergency coverage for people who are pregnant. (Note that undocumented immigrants cannot enroll in private plans through the marketplace, with or without premium subsidies.)

Medicaid eligibility varies from state to state. For example, several states, including California, Oregon, New York, and Connecticut, have chosen to extend Medicaid eligibility to some undocumented immigrants who otherwise meet the income criteria for eligibility.

Who Pays for Medicaid?

Medicaid is paid for by federal and state taxes. It is administered at the state level. That's why coverage and eligibility rules vary from one state to another.

If you receive Medicaid, your friends, neighbors, and fellow citizens are paying for your health care with their tax dollars.

Even though Medicaid is government health insurance, most of the care provided to people who receive it comes from private businesses and healthcare providers. Most states contract with private insurance companies to administer coverage. On your ID card, you might have the name and logo of a well-known insurance provider.

Depending on the state where you live and your Medicaid eligibility category, you'll be able to apply for Medicaid through your state's ACA health insurance exchange or by contacting your state’s Medicaid program directly.

Affordable Care Act Subsidy

The Affordable Care Act (ACA) provides government subsidies to make health insurance affordable for people who buy their own health insurance through the exchange/marketplace. This coverage is also called Obamacare.

The law includes premium tax credits (premium subsidies) that offset some or all of the monthly premiums.

There are also cost-sharing reductions (CSR) that reduce the out-of-pocket costs that some enrollees have to pay when they need medical care.

Premium tax credits and CSR are both federal benefits, so they're available nationwide. Some states also offer additional premium subsidies and/or cost-sharing subsidies, on top of the federal subsidies.

How Subsidies Work

If you're eligible for a premium tax credit you can opt to have it paid to your insurer each month on your behalf.

That means you won't have to claim it all at once on your tax return at the end of the year (you'll still have to reconcile the amount on your tax return). The government pays part of your monthly insurance premium and you pay the rest.

Subsidies can only be used to buy Obamacare health insurance sold on the ACA's health insurance exchanges—also called the Marketplace. They cannot be used to help pay for health insurance through your job or a health plan purchased outside the marketplace.

Temporary Subsidy Enhancements

From 2014 through 2020, under the terms of the ACA, there was an income cap of 400% of the poverty level to qualify for the premium tax credit.

So for at least five years (2021 through 2025), the enhanced ACA subsidies ensure that nobody who buys a plan in the marketplace/exchange pays more than 8.5% of their household income in premiums for a benchmark plan.

Who Qualifies for Subsidies?

Depending on where you live and how old you are, you may qualify for a premium subsidy even if your income is well above 400% of the poverty level. (This will be true through at least 2025, and Congress might decide to further extend that provision.)

However, if the cost of the benchmark plan would already be no more than 8.5% of your income without a subsidy, you would not be eligible for a subsidy.

Obamacare subsidies are not available to undocumented immigrants. However, most legally-residing immigrants can apply.

(Note that subsidies are not available if you're eligible for employer-sponsored health coverage that's considered adequate, or if you're eligible for Medicaid or premium-free Medicare Part A.)

With the subsidy enhancements created by the American Rescue Plan, the Centers for Medicare and Medicaid Services (CMS) reports that:

• Eighty percent of marketplace enrollees have access to at least one plan that costs $10 or less in monthly premiums after the tax credits are applied.
• More than half of enrollees have access to a silver plan that costs $10 or less in monthly premiums.

Subsidies have made self-purchased health insurance much more affordable, but few people purchase their own coverage. Most people get health insurance from their employer or from the government (Medicare, Medicaid, CHIP).

Cost-Sharing Reductions

If your income is between 100% and 250% of the federal poverty level (and you're not eligible for Medicaid), you may get more help to pay your deductible, copays, and coinsurance when you use your health insurance. This is known as a cost-sharing reduction (CSR) subsidy.

CSR benefits are part of the ACA. For eligible applicants, CSR is built into Silver-level plans in the exchange/marketplace.

The federal government used to reimburse insurers for the cost of providing this benefit, but that ended in late 2017, under the Trump administration. Since then, insurers in most states have added the cost of CSR to premiums of on-exchange Silver-level plans. This results in higher Silver premiums, which in turn results in larger premium subsidies. But nothing has changed about the CSR benefits themselves, or eligibility for these benefits.

How to Apply

If you’re a legal U.S. 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.

If you're eligible for CSR, all of the available Silver-level plans will have the CSR benefits incorporated into them. This means the deductibles, copays, and out-of-pocket maximums on these plans will be lower than they would otherwise be.

You can find your state’s health insurance exchange using the HealthCare.gov tool.

Short-term Health Insurance

Short-term health insurance often costs less than more comprehensive plans. It's an attractive option for people looking for temporary coverage if they aren't eligible for Marketplace subsidies or missed their enrollment window for ACA-compliant coverage.

In some states, plans are sold in terms of up to 364 days of coverage. And some insurers allow their plans to be renewed for up to a total of 36 months. These are currently the upper limits allowed by the federal government.

But the Biden administration has finalized a rule change that will cap short-term health plans at initial terms of no more than three months, and total duration (including renewal, if offered) of no more than four months, starting in September 2024.

Even while the more relaxed federal rules are in place, there are states that place more restrictive limits on plan durations. Some states do not allow short-term plans to be sold at all.

Even in states that do not limit short-term plans beyond the federal minimum requirements, insurers can choose to offer plans that are non-renewable or that have shorter durations.

Is a Short-Term Plan Right for Me?

Although short-term health insurance can be a low-cost option, it isn’t right for everyone. You will need to understand what the plans will cover, and how long you will have that coverage.

For example, a short-term health insurance policy can place a cap on benefits. This limits the insurer’s potential losses if you get seriously ill while you're covered. If you get very sick and need a lot of medical care, that's expensive for the insurer.

Short-term plans also do not have to cover essential health benefits—that includes things like maternity care and mental health care. Many plans also do not include outpatient prescription drug coverage.

If you have a medical condition, you should know that almost all short-term plans do not provide coverage for any pre-existing conditions.

Who Qualifies?

If an insurer thinks that you're a risk to cover, they can turn you down. On the other hand, if you're young, healthy, and are not seen as a risk, you might be able to get short-term health insurance.

While it's a lower-cost option, you need to read all the fine print, understand how post-claims underwriting works, and know what the plan does and doesn't cover.

How to Buy a Short-term Plan

There are a few ways to buy a short-term health insurance plan:

• Buy a policy directly from a health insurance company.
• Use your own insurance agent (if you have one).
• Find a health insurance agent or broker through a National Association of Health Underwriters website.
• Use a non-governmental private online exchange (such as ehealthinsurance.com).

Can I Buy a Short-term Plan on the Exchange?

No, short-term health insurance is not sold on ACA health insurance exchanges such as HealthCare.gov, and ACA subsidies cannot be used with short-term health insurance.

Short-term health plans are not considered minimum essential coverage.

If you experience a qualifying event that would typically trigger a special enrollment period where you could get an ACA-compliant plan, you would not be able to do so if the rules require you to have had minimum essential coverage in place before the qualifying event.

For example, even though the involuntary loss of coverage is a qualifying event that normally lets a person enroll in an ACA-compliant plan, the loss of a short-term plan does not.

Moving is another example. If you move from one area to another, it will not trigger a special enrollment period if you had coverage under a short-term plan before you moved.

You must have had coverage under a plan that counts as minimum essential coverage beforehand to qualify for a special enrollment period that's triggered by your move.

Job-based Health Plan

Many employers in the U.S. subsidize health insurance for their employees and their employees’ families as part of the employee’s benefits and compensation package.

Health coverage is a common benefit for full-time employees of large companies, but it's less common for part-time employees and small businesses.

Who Qualifies?

When you get a job that comes with health insurance benefits, your employer may offer only one health plan. They may also offer several options and allow you to choose the one that best fits your needs and budget.

You have a limited 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. Employers set their own open enrollment periods, so the specific dates vary from one employer to another.

You may have a short waiting period before your coverage begins—usually 30 to 90 days. The ACA caps the waiting period at 90 days, and some employers don't have a waiting period at all. Once the coverage takes effect, pre-existing conditions are covered right away, with no additional waiting period.

Who Pays for Coverage?

When you have employer-sponsored health insurance, your employer usually pays part of the monthly premiums and you pay part of the monthly premiums.

In most cases, your employer will pay most of the cost, though it varies. Your share of the premiums gets taken out of your paycheck automatically. That means you don’t have to remember to pay the bill each month.

With job-based health insurance, your employer usually doesn't help you pay cost-sharing expenses like deductibles, copays, and coinsurance.

However, some employers offer savings plans like Flexible Spending Accounts, Health Savings Accounts, or Health Reimbursement Arrangements.

What If I Quit or Lose My Job?

In most cases, when you quit or lose your job, you also lose your job-based health insurance coverage.

You might be eligible to temporarily continue your coverage with COBRA or state continuation.

However, you have to be able to pay both your share of the premium and the part your employer had been paying, in addition to an administrative fee.

Spouse's Health Plan

If your spouse has job-based health insurance, you might be eligible for the same coverage. Most employers extend the offer of job-based health insurance to their employees’ spouses, children, and step-children.

How to Get Covered

You can sign up for this coverage during the initial enrollment period when your spouse first gets the job.

If you miss this opportunity, you’ll have another chance during each annual open enrollment period that their employer offers.

You'll also have an opportunity to join your spouse's plan if you experience a qualifying event, such as losing your own health plan or having a baby.

Can I Choose Different Coverage?

If your spouse’s employer offers the company health plan to you and your children, you don't have to accept it.

However, before you make this move, you should understand how marketplace/exchange subsidy eligibility works if you have access to health coverage from your spouse's employer.

Prior to 2023, subsidy eligibility in this situation was very limited due to the "family glitch." This meant that if the employer-sponsored plan was considered affordable for just the employee alone, the entire family was ineligible for marketplace subsidies if they were eligible to be added to the employer-sponsored plan—regardless of the cost to add them to that plan.

But as of 2023, the Biden administration fixed that issue, at least somewhat. The new rules ensure that the affordability of the employer-sponsored plan is determined separately for the employee and also for the whole family.

If the employee's coverage is considered affordable but coverage for the whole family is not, the family members are potentially (but not necessarily) eligible for subsidies in the marketplace.

Who Pays for Coverage?

Employers will generally subsidize an employee’s job-based health insurance by paying a portion of the monthly premiums. However, an employer may not subsidize spousal or family coverage.

Many employers do subsidize family members' coverage. The employer usually pays a smaller percentage of the total cost of family health insurance than for employee-only coverage.

If your spouse’s employer offers health insurance to their family members, your share of the premiums will be deducted from your spouse’s paycheck automatically.

Parent's Health Plan

If you’re younger than 26 years old and your parent has health insurance, you're likely eligible to be covered under that plan as well.

(If you're not already enrolled in your parent's health plan, you'll only be able to join the plan during its annual enrollment window or a special enrollment period triggered by a qualifying life event.)

You can be covered as a dependent if your parent has:

• An individual market plan that was purchased on-exchange or off-exchange
• A grandmothered or grandfathered plan
• A job-based plan that offers coverage to dependents

You can still get covered even if you’re not your parent’s tax dependent, you’re married, or you’re living on your own.

Note that Medicare doesn't offer any dependent coverage, so if your parent has Medicare you'll need to obtain other health insurance regardless of your age.

How to Get Coverage

You may have to wait until the next open enrollment period with your parent’s health plan to be added to their health insurance coverage.

However, if you’ve recently lost other comprehensive health insurance coverage, you might be able to enroll before open enrollment if you meet the health plan’s requirements for a special enrollment period.

Who Pays for Coverage?

Some employers subsidize their employees’ health insurance and health insurance coverage for employees’ families.

Other employers pay a portion of their employees’ health insurance premiums but do not subsidize premiums for family members.

If your parent has job-based health insurance and their employer subsidizes family premiums, then your health insurance premiums will be paid in part by your parent’s employer. The rest will be taken out of your parent’s paycheck.

If your parent’s employer does not subsidize family coverage, your entire monthly premium will be deducted from your parent’s paycheck.

If your parents buy their own health coverage, your premium will be added to theirs in order to get the new total monthly amount. Depending on the family's circumstances (and whether they purchase their coverage through the exchange/marketplace), they may qualify for a premium subsidy.

Assuming you're no longer a tax dependent, you'll each have to reconcile the premium subsidy on your own tax return, but you can choose to allocate your subsidy to your parents' return if they paid for your portion of the coverage during the year.