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AgileHealthInsurance Survey | 12-14-2015

Term health insurance costs less than Obamacare for young adults losing coverage on their parents’ health plans

26 year-olds with incomes between $27,015 and $75,630 would pay less for term health insurance than Obamacare even with penalty factored into costs

Under the Affordable Care Act, young adults have the option to stay covered by their parents’ health insurance plans until they turn 26. When they turn 26, they qualify for a special enrollment period to buy an Obamacare plan. For many 26-year-olds losing coverage on their parents’ health insurance plans, term health insurance is less expensive than any Obamacare plan.

Term health insurance plans usually have much lower premiums than Obamacare plans. However, since term health insurance plans are not qualified health plans under the Affordable Care Act, term health insurance enrollees have to pay the Obamacare uninsured penalty unless they qualify for an exemption. Moreover, enrollees in Obamacare metal plans with household incomes between 100 percent and 400 percent of the federal poverty level can qualify for premium subsidies that lower the cost of their Obamacare plans.1 Term health insurance enrollees do not qualify for premium subsidies.

Since the uninsured penalty makes term insurance more expensive and premium subsidies make Obamacare less expensive, it is necessary to account for both penalties and premium subsidies when comparing the costs of term health insurance and Obamacare plans for 26 year-olds. Accordingly, premiums for Obamacare bronze plans examined in this study are reduced based on advanced premium tax credits (also known as “premium subsidies”). Costs for term health insurance plans, in contrast, included the uninsured penalty.

With respect to premiums for both types of health coverage, the lowest cost plan premiums (bronze plans and term health insurance plans) for 26 year-old men and women were averaged across the most populous cities in 36 states on Healthcare.gov. The only states on Healthcare.gov that were excluded from the averages were New Jersey and Michigan since AgileHealthInsurance did not have data for term health insurance plans in New Jersey and Michigan.

The average deductible for the bronze plans examined was $5,851 and the average cap on out-of-pocket costs for these bronze plans was $6,639. In order to eliminate very low premium plans with excessive cost-sharing, term health plans examined were restricted to those that had a deductible not exceeding $5,000, out-of-pocket cap not exceeding $6,000, and lifetime maximum insurance payments of at least $1 million.

Findings

The results of the analysis identified a broad income range where term health insurance premiums plus the penalty were still less expensive than subsidized bronze plans. For a 26-year-old female with household income between $27,015 and $75,630, term health insurance was less expensive than Obamacare. For a 26-year-old male with household income between $26,552 and $78,365, term health insurance was also less expensive than Obamacare.

Term insurance had the greatest cost advantage over Obamacare at household incomes near $38,000. For a 26-year-old female with a household income of $38,250, the least expensive term insurance plan was $67.80 less expensive per month than the least expensive subsidized Obamacare bronze plan. For a 26-year-old male with the same household income, term insurance was $73.50 less expensive per month.

Age 26 Average Monthly Cost Comparison

Household Income

Least Expensive Subsidized Obamacare Age 26

Least Expensive Term Insurance Female Age 26 with Uninsured Penalty

Least Expensive Term Insurance Male Age 26 with Uninsured Penalty

Cost Difference (Obamacare minus Term Insurance) Female Age 26

Cost Difference (Obamacare minus Term Insurance) Male Age 26

$20,000.00

$33.03

$115.15

$109.45

-$82.11

-$76.41

$21,000.00

$43.85

$115.15

$109.45

-$71.29

-$65.60

$22,000.00

$55.31

$115.15

$109.45

-$59.84

-$54.14

$23,000.00

$67.40

$115.15

$109.45

-$47.75

-$42.05

$24,000.00

$79.20

$115.15

$109.45

-$35.94

-$30.25

$25,000.00

$90.58

$115.15

$109.45

-$24.57

-$18.87

$26,000.00

$102.53

$115.15

$109.45

-$12.61

-$6.92

$27,000.00

$114.90

$115.15

$109.45

-$0.25

$5.45

$28,000.00

$127.30

$115.15

$109.45

$12.15

$17.85

$29,000.00

$140.13

$115.15

$109.45

$24.98

$30.68

$30,000.00

$151.63

$115.15

$109.45

$36.49

$42.19

$31,000.00

$161.21

$115.15

$109.45

$46.06

$51.76

$32,000.00

$168.73

$115.15

$109.45

$53.58

$59.28

$33,000.00

$174.11

$115.15

$109.45

$58.96

$64.66

$34,000.00

$177.11

$115.15

$109.45

$61.96

$67.66

$35,000.00

$179.19

$115.15

$109.45

$64.05

$69.74

$36,000.00

$180.59

$115.15

$109.45

$65.45

$71.15

$37,000.00

$181.65

$115.15

$109.45

$66.50

$72.20

$38,000.00

$182.68

$115.15

$109.45

$67.54

$73.24

$39,000.00

$183.65

$116.71

$111.01

$66.94

$72.64

$40,000.00

$184.48

$118.79

$113.09

$65.69

$71.39

$41,000.00

$185.25

$120.87

$115.18

$64.38

$70.08

$42,000.00

$185.89

$122.96

$117.26

$62.93

$68.63

$43,000.00

$186.40

$125.04

$119.34

$61.36

$67.06

$44,000.00

$186.82

$127.12

$121.43

$59.70

$65.39

$45,000.00

$187.07

$129.21

$123.51

$57.87

$63.56

$46,000.00

$187.30

$131.29

$125.59

$56.01

$61.70

$47,000.00

$187.52

$133.37

$127.68

$54.15

$59.85

$48,000.00

$187.75

$135.46

$129.76

$52.29

$57.99

$49,000.00

$187.97

$137.54

$131.84

$50.43

$56.13

$50,000.00

$188.19

$139.62

$133.93

$48.57

$54.27

$51,000.00

$188.42

$141.71

$136.01

$46.71

$52.41

$52,000.00

$188.64

$143.79

$138.09

$44.85

$50.55

$53,000.00

$188.86

$145.87

$140.18

$42.99

$48.69

$54,000.00

$189.09

$147.96

$142.26

$41.13

$46.83

$55,000.00

$189.31

$150.04

$144.34

$39.27

$44.97

$56,000.00

$189.53

$152.12

$146.43

$37.41

$43.11

$57,000.00

$189.76

$154.21

$148.51

$35.55

$41.25

$58,000.00

$189.98

$156.29

$150.59

$33.69

$39.39

$59,000.00

$193.03

$158.37

$152.68

$34.65

$40.35

$60,000.00

$193.03

$160.46

$154.76

$32.57

$38.27

$61,000.00

$193.03

$162.54

$156.84

$30.48

$36.18

$62,000.00

$193.03

$164.62

$158.93

$28.40

$34.10

$63,000.00

$193.03

$166.71

$161.01

$26.32

$32.02

$64,000.00

$193.03

$168.79

$163.09

$24.23

$29.93

$65,000.00

$193.03

$170.87

$165.18

$22.15

$27.85

$66,000.00

$193.03

$172.96

$167.26

$20.07

$25.77

$67,000.00

$193.03

$175.04

$169.34

$17.98

$23.68

$68,000.00

$193.03

$177.12

$171.43

$15.90

$21.60

$69,000.00

$193.03

$179.21

$173.51

$13.82

$19.52

$70,000.00

$193.03

$181.29

$175.59

$11.73

$17.43

$71,000.00

$193.03

$183.37

$177.68

$9.65

$15.35

$72,000.00

$193.03

$185.46

$179.76

$7.57

$13.27

$73,000.00

$193.03

$187.54

$181.84

$5.48

$11.18

$74,000.00

$193.03

$189.62

$183.93

$3.40

$9.10

$75,000.00

$193.03

$191.71

$186.01

$1.32

$7.02

$76,000.00

$193.03

$193.79

$188.09

-$0.77

$4.93

$77,000.00

$193.03

$195.87

$190.18

-$2.85

$2.85

$78,000.00

$193.03

$197.96

$192.26

-$4.93

$0.77

$79,000.00

$193.03

$200.04

$194.34

-$7.02

-$1.32

$80,000.00

$193.03

$202.12

$196.43

-$9.10

-$3.40

In Laramie County, Wyoming, the least expensive term health insurance plan was $140 less expensive for females and $146 less expensive for males per month than the least expensive Obamacare bronze plan. For every city included in the analysis, term health insurance was less expensive than Obamacare for 26-year-olds with a household income of $38,000. However in Bernalillo County, New Mexico, the least expensive term health insurance plan was only $8 less expensive for males and $2 less expensive for females per month than the least expensive Obamacare bronze plan.

Monthly Cost Comparison by City: Age 26 with $38,000 Household Income

County

State

Least Expensive Subsidized Obamacare Age 26

Least Expensive Term Insurance Female Age 26 with Uninsured Penalty

Least Expensive Term Insurance Male Age 26 with Uninsured Penalty

Cost Difference (Obamacare minus Term Insurance) Female Age 26

Cost Difference (Obamacare minus Term Insurance) Male Age 26

LARAMIE

WY

$263.48

$123.42

$117.32

$140.06

$146.16

KANAWHA

WV

$249.64

$117.80

$112.26

$131.84

$137.38

MECKLENBURG

NC

$222.99

$115.91

$110.56

$107.08

$112.43

YELLOWSTONE

MT

$199.43

$94.28

$94.28

$105.15

$105.15

NEW CASTLE

DE

$217.94

$118.33

$112.74

$99.61

$105.20

PULASKI

AR

$204.50

$105.51

$101.22

$98.99

$103.28

MINNEHAHA

SD

$194.96

$101.01

$94.40

$93.95

$100.56

MARION

IN

$194.63

$103.45

$98.86

$91.18

$95.77

HINDS

MS

$200.63

$109.51

$104.80

$91.12

$95.83

VIRGINIA BEACH CITY

VA

$204.68

$113.71

$108.58

$90.97

$96.10

CASS

ND

$200.63

$109.93

$105.18

$90.70

$95.45

MILWAUKEE

WI

$213.84

$125.89

$119.54

$87.95

$94.30

CUMBERLAND

ME

$193.45

$111.02

$103.55

$82.43

$89.90

DOUGLAS

NE

$194.02

$113.60

$108.49

$80.42

$85.53

JEFFERSON

AL

$195.79

$118.28

$112.69

$77.51

$83.10

JEFFERSON

LA

$189.29

$112.45

$107.45

$76.84

$81.84

FRANKLIN

OH

$179.84

$105.25

$100.98

$74.59

$78.86

FULTON

GA

$177.24

$103.69

$96.62

$73.55

$80.62

CLAY

MO

$177.33

$104.94

$100.70

$72.39

$76.63

RICHLAND

SC

$192.56

$121.11

$115.24

$71.45

$77.32

DUVAL

FL

$187.94

$118.38

$112.78

$69.56

$75.16

SEDGWICK

KS

$170.65

$103.58

$96.53

$67.07

$74.12

SALT LAKE

UT

$166.00

$99.37

$95.69

$66.63

$70.31

HONOLULU

HI

$159.01

$107.56

$103.06

$51.45

$55.95

CLARK

NV

$170.05

$118.80

$113.16

$51.25

$56.89

HILLSBOROUGH

NH

$160.73

$110.82

$103.38

$49.91

$57.35

SHELBY

TN

$156.10

$111.29

$106.41

$44.81

$49.69

MULTNOMAH

OR

$159.27

$114.76

$109.53

$44.51

$49.74

OKLAHOMA

OK

$155.53

$111.13

$106.27

$44.40

$49.26

HARRIS

TX

$160.15

$121.27

$115.38

$38.88

$44.77

PHILADELPHIA

PA

$181.82

$159.98

$150.18

$21.84

$31.64

MARICOPA

AZ

$129.15

$115.44

$110.14

$13.71

$19.01

POLK

IA

$146.14

$134.64

$123.25

$11.50

$22.89

ANCHORAGE

AK

$154.26

$144.64

$136.39

$9.63

$17.88

COOK

IL

$131.10

$124.63

$118.40

$6.47

$12.70

BERNALILLO

NM

$121.81

$119.96

$114.20

$1.85

$7.61

Average

$182.68

$115.14

$109.45

$67.54

$73.24

Conclusion

For 26-year-olds with household incomes between $27,015 and $75,630 that lose coverage on their parents’ health insurance plans, term health insurance is less expensive than Obamacare even when taking premium subsidies and the uninsured penalty into account. Average monthly savings for term health insurance were up to $73.50 for males and $67.80 for females.

The cost difference between the least expensive term health insurance plans and Obamacare bronze plans varied by location and household income since Obamacare premium subsidies depend on both household income and the cost of the second least expensive silver plan in the consumer’s rating area. For 26-year-olds with a household income of $38,000, the cost advantage for term health insurance was over $140 per month in Laramie County, Wyoming, but less than $10 per month in Bernalillo County, New Mexico.

The cost advantages of term health insurance may prove to be particularly attractive to 26 year-olds leaving their parents’ health coverage given the age group’s general trend towards good health and fewer pre-existing conditions. Ideally, any health plan decision should be informed by a consumer’s health considerations and anticipated benefit needs. In addition to premiums, subsidies, and penalties, consumers should also consider out-of-pocket costs such as deductibles and coinsurance fees when they choose a plan. Consumers that want to keep their current doctors should check the provider networks for the plans that they are considering. Since term health insurance plans are not required to cover the same benefits as Obamacare plans, consumers should also check benefit differences between plans before making a selection.

Methodology

AgileHealthInsurance obtained premium quotes for 2016 Obamacare bronze plans and term health insurance plans with deductible at most $5,000, out-of-pocket cap at most $6,000, and lifetime maximum at least $1 million. Premiums were quoted for men and women age 26 in the most populous city in each of the 36 states using Healthcare.gov in December 2015 in which AgileHealthInsurance also sells term health insurance plans.

Data on 2016 Obamacare plans is from the 2016 QHP landscape file for the individual medical market, as well as the 2016 landscape files for the individual medical markets in NM, NV, OR, and HI. Data for term health insurance plans was obtained from the AgileHealthInsurance API and reflects the landscape of plans available through AgileHealthInsurance. The term health insurance plans in the AgileHealthInsurance API included the following types of plans:

The analysis assumes the accuracy of the underlying data. The analysis also assumes that the term health insurance applicants would qualify for underwriting from the carriers.

  1. The federal poverty level was $11,770 for individuals in the contiguous United States, $13,550 in Hawaii, and $14,720 in Alaska.

AFFORDABLE CARE ACT TAX. Short Term health insurance is health insurance outside of the Affordable Care Act ("Obamacare"). It does not include all ten of the minimum essential benefits of Obamacare and it does not cover pre-existing conditions. To learn more about the tax, its exemptions, and how to calculate the affordability of short term health with the tax, see here. To learn more about the differences between Short Term health insurance and Obamacare, see here.