Pros and Cons to Ditching Your Employer’s Health Insurance Plan

Many employees agree that one of the best benefits to their job is affordable health insurance. Employer-based insurance works by sharing the costs of premiums with a larger group, making employer-based health insurance more affordable in many instances.

On average, a regular family health insurance plan costs over $20,000 a year, but most families only pay $6,000 in premiums with employer-based health insurance. Your employer’s coverage may be seemingly affordable, but many employees still cancel their employer’s health insurance.   

Your employer’s insurance may not cover all your needs. If that’s the case for you, it might be time to start looking at other coverage options.

Also Read: Step-By-Step Guide To Prepare For Open Enrollment (2021)

When Can You Cancel Your Employer’s Health Insurance?

To cancel your employer’s health insurance coverage, you’ll need to qualify for special enrollment or wait until the next open enrollment. During open enrollment, you can either cancel your current plan or apply for an individual one. To qualify for special enrollment, you need to have had a qualifying life event occur. After the qualifying life event, you only have 60 days to choose a new health insurance policy. 

If you have an individual plan, you can cancel your health insurance policy at any time without a qualifying event. However, once you cancel your policy, you cannot purchase health insurance until the next Open Enrollment.

Also Read: Where To Get Affordable Health Insurance If You’re Self-Employed 

Pros To Cancelling Your Employer’s Health Insurance

There are lots of reasons why you might want to cancel your employer’s health insurance coverage. Common reasons for opting out of your employer’s health insurance might include:

  • Wanting to save more money.
  • Your spouse or domestic partner has better coverage. 
  • You’re about to retire or quit. 
  • You’ve had another recent change in your family.

Whatever the reason might be for wanting to ditch your employer’s health insurance, there’s lots of positives for going with an individual plan instead. 

More Coverage Options To Choose From

Depending on your employer, you may not receive all the benefits you really need. The size of the company and who else works there affects your health insurance options. For instance, let’s say you work for a company with a lot of single people. Your employer would likely offer more plans catered towards individuals rather than families. This might not suit all your medical needs if you have a family.

With a private plan, you can choose from hundreds of options that can offer more coverage for what you really need.     

Your Employer’s Health Insurance Isn’t The Best Deal

You might not be saving all that much money with your employer’s health insurance. To meet the government’s minimum standard, individual plans cannot be more than 9.78% of an employee’s monthly income. These plans also need to cover at least 60% of any medical services. 

Just because your employer offers the minimum standard, doesn’t mean that it’s the best option for you. If you have a chronic health condition, you’ll need a plan with a higher premium and more coverage. With the minimum standard, you’d still be paying around 40% of all your medical costs! 

Insider Tip: Compare your out-of-pocket costs on your employer’s plan with other private quotes. When comparing your health insurance quotes, don’t just look at the premiums. Consider your other medical expenses, such as prescriptions. Be sure to read our guide on 2021’s open enrollment for more tips on how to compare health insurance plans.

Your Employer’s Health Insurance Doesn’t Cover All Your Medical Expenses

Another common reason employees cancel their employer’s health insurance is because it simply doesn’t cover everything. This can be especially true if you were recently diagnosed with a chronic condition like diabetes. 

Also Read: How Diabetes Affects Your Health Insurance 

You may not even have a chronic condition, but if you have a family, you’ll need coverage for all of their needs as well. Think of what both you and your dependents need when assessing your employer’s health insurance coverage.

You May Want To Opt For Medicaid or Other Government Assistant Programs

If you make less than $25,000 a year, or are 138% below the federal poverty line, you can qualify for government assistance programs like Medicaid or CHIP. If your income is higher than this, and you still cannot afford private insurance, you may still be able to qualify for government-assistance programs like these. 

These programs often offer more coverage than a lot of employer-based health insurance. This means if you do have a chronic health condition, having Medicaid rather than your employer’s health insurance could save you. 

You Might Be Missing Out On The Premium Tax Benefit Anyways

Your family is constantly changing, but this can also change your health insurance coverage is too. Many health insurance plans offer a premium tax credit. To qualify, your income must be between 100 to 400% of the federal poverty level.

However, if your income has increased or you’ve recently lost a dependent, you may not receive this tax credit. This makes your employer’s health insurance less affordable than a private plan. 

Also Read: What You Need To Know About Your Health Savings Account 

COBRA Doesn’t Give You The Best Deal

If you’ve recently left your job, you might consider applying for COBRA (Consolidated Omnibus Budget Reconciliation Act). COBRA allows you to keep your employer’s current health insurance even if you don’t work them anymore. 

With this coverage, your employer no longer contributes towards your premium costs. Let’s say your employer used to pay 70% of your health insurance premiums; with COBRA, you would have to pay for 100% of the premium costs. This can be quite expensive, and incredibly unaffordable for many employees. 

Cons To Cancelling Your Employer’s Health Insurance 

It might start to seem like finding your own private plan is the best option. Let’s take a look at why you shouldn’t cancel your employer’s health insurance. 

Private Insurance Is Five Times More Expensive

With your employer’s health insurance, you only have to pay a portion of the premium costs. Employers pay anywhere between 60 to 80% of the total premium costs. This means if your employer covers more in your premium costs, you’re likely getting a better deal. 

Check to see how much your normal premiums are compared to what your employer is actually paying. Most employers cover about 75% of your premiums, which means better savings for employees. 

You Won’t Receive Marketplace Savings Or Premium Tax Credits

With your employer’s insurance, you’ll be able to find great savings on the marketplace during open enrollment. As long as your employer meets the minimum standard for health insurance, their marketplace plan will be far cheaper than if you purchased it privately. Although the plans might not cater to exactly what you need, you will save more premium costs through your employer’s insurance. 

With your employer’s health insurance plan, you’ll likely receive a premium tax credit. Come tax time, you’ll be reimbursed for some of your health insurance expenses if you qualify for the premium tax credit. 

You’ll Miss Out On HSAs, HRAs, And FSAs

Health Saving Accounts (HSA), Health Reimbursement Accounts (HRA), and Flexible Spending Accounts (FSA) are often used by employer-based health insurance. These tax-free, money-saving accounts help employees in case there’s an unexpected emergency. If you don’t have an emergency or an unexpected cost, the account’s savings go right back to you. These accounts are a great way to save money for an emergency. If you don’t use them, the money is yours at the end of fiscal year. Talk to your employer to see what policy they have on these accounts and if you have one.

Also Read: The Ultimate Guide To Navigating Your Health Insurance

There’s A Real Price To Pay If You’re Uninsured 

You might think that the best way to save money is to opt out of health insurance altogether. This wouldn’t be a half bad idea if you rarely need to see a doctor because you’re in good health. However, accidents and unexpected illnesses happen all the time, making it extremely unsafe for you to not have health insurance. 

Not only can you put yourself in astonishing debt, you’re less likely to seek help if you do get sick.

So Should You Cancel Your Employers Health Insurance?

Everyone has different medical needs. Your employer’s health insurance may not cover everything you need it to, or you’re not getting a good deal from it. Many employees do opt out or cancel their employer’s insurance because they have other options, or think a private plan will suit them better. 

Employer-based health insurance can save you money on health insurance. Many employers do offer premier health insurance benefits, even if they’re a smaller business. 

During Open Enrollment, you should always compare your employer’s health insurance to private quotes. This can show you how much money you’re really saving on your employer’s health insurance. If you ever get stuck, or want to get some more quotes, call Quote Purple to talk to a partner. 

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