4 Ways to Choose Between Obamacare and Job-Based Health Insurance

Not sure which you should choose, Obamacare or the health insurance offered through your job? Need to figure out which gives you more bang for your buck, Obamacare versus job-based health insurance? Here’s how to compare job-based health insurance with the Obamacare plans available on your Affordable Care Act health insurance exchange in 4 easy steps.

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Step 1—Determine the Actuarial Value of the Job-Based Health Plan

Scientist comparing two sets of slides.
You don't have to have a PhD in biochemistry to figure out which is the best deal for you, Obamacare or job-based health insurance. There's a shortcut. Nicola Tree/Getty Images

Comparing exact coverage details is pretty difficult when you’re trying to choose between several health plans. However, there’s a short cut that’s much easier: compare actuarial values.

The actuarial value of a health plan tells you what percentage of yearly health care expenses, on average, the health plan pays for its members. The higher the actuarial value number, the more valuable the health plan benefits are. For example, a health plan with an actuarial value of 85% will pay approximately 85% of all members’ covered health care expenses. Members are expected to pay the other 15% of their covered health care expenses via cost-sharing requirements like deductibles, copays and coinsurance.

To discover the actuarial value of the health plans available through your job, you’ll have to ask. Your employee benefits department or human resources department is the place to start. Another option is to call the customer service number for the job-based health plan you’re considering and get the actuarial value from a health plan customer service employee.

Once you know the actuarial value of your job-based health plan, you’re ready to move on to step 2.

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Step 2—Compare Job-based Health Plan & Obamacare Plan Actuarial Values

Three red apples
When comparing health plans, compare apples to apples by comparing plans of similar actuarial values. Marek Mnich/Getty Images

Once you know the actuarial value of the job-based health plan your employer is offering, pick a plan or two of a similar actuarial value from your Obamacare exchange. You can tell an Obamacare plan’s actuarial value by its metal-tier.

  • Bronze health plans have an actuarial value of approximately 60%.
  • Silver health plans have an actuarial value of approximately 70%.
  • Gold health plans have an actuarial value of approximately 80%.
  • Platinum health plans have an actuarial value of approximately 90%.

[It's important to understand that plans at each metal level can fall into an actuarial value range. For bronze plans, the range is especially wide, extending from 56 percent to 65 percent.]

For example, if the job-based health insurance your employer offers has an actuarial value of 72%, you’d pick a couple of silver-tier Obamacare plans to compare it with since silver plans have an actuarial value close to your job-based plan.

By comparing health plans of similar actuarial values, you’re ensuring that you’re comparing apples to apples. If you compared a 90% actuarial value health plan available at work with a 60% actuarial value exchange-based health plan, it would be kind of like comparing a Porsche 911 with a Ford Mustang. Instead, you need to compare a Honda Accord with a Toyota Camry so you can figure out how much bang you’re getting for your buck when you compare your job-based health plan with an Obamacare plan.

Once you’ve picked an Obamacare plan or two with the appropriate actuarial value from the exchange, you’re ready to move on to step 3.

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Step 3—Determine Your Costs for Obamacare and Job-Based Health Insurance

Woman holding several $20 bills.
Find out how much you'll have to pay for each of the health plans you're comparing. Glow Wellness/Getty Images

Determining the Monthly Premium Cost for Employer-Sponsored Health Insurance

Job-based health insurance is usually subsidized by your employer. Your employer pays part of the monthly cost of your health insurance, and you pay part. Your part is usually taken out of your paycheck pre-tax so you don’t pay income taxes on it.

Ask your employee benefits department how much your contribution toward the cost of your health insurance premiums will be each month if you choose job-based health insurance.

Determining the Monthly Premium Cost for Exchange-Based Health Insurance

To determine your cost for the Obamacare health plans, you’ll have to go back to your health insurance exchange. You can get pricing information without creating an account or providing identifying information. Since exchange-based health plans (like all individual market plans) are allowed to alter their premiums based on your age, where you live, and whether or not you smoke, you’ll have to enter this information into the online health insurance exchange portal before you’ll be able to get any information about costs. But you're not required to create an account with the exchange in order to do this.

Although Obamacare health insurance is subsidized for most enrollees, it’s not likely to be subsidized for you. If you’re offered health insurance by your employer, you’re not eligible for an Obamacare subsidy unless the health insurance your employer offers is exceptionally lousy or is unaffordable.

In this instance, exceptionally lousy means your job-based health plan has an actuarial value of less than 60%. Your employer’s health insurance would be considered unaffordable if your share of the cost for coverage for just yourself (regardless of what it costs to cover your family), costs more than 9.86% of your household income in 2019.

You might qualify for the premium tax credit health insurance subsidy to help pay for health insurance you buy from an exchange if

  • If your income is between 100% and 400% of federal poverty level, and
  • the health insurance your employer offers has an actuarial value less than 60% (ie, it doesn't provide minimum value) or
  • your share of the premiums for job-based health insurance is more than 9.86% of your household income.

But it's very uncommon for an employer-sponsored plan to not provide minimum value and/or to be considered unaffordable for just the employee's portion of the coverage. If your employer offers coverage, chances are you're not going to qualify for subsidies in the exchange.

But if you do meet the criteria for subsidy eligibility, the best way to determine your cost for the Obamacare plans you’re comparing with your job-based health plan is to apply for the subsidy through your health insurance exchange. Creating an account with the exchange and applying for financial assistance does not obligate you to buy the health insurance or accept the financial aid. You can still decide to choose your employer’s health plan, instead.

If you're not eligible for an Obamacare subsidy, you can just look at the full-price premium for the individual market plans you're considering. You can get these prices from the exchange or directly from an insurance company (and a broker can help you get that information, regardless of whether you're looking at plans in the exchange or plans sold directly by insurance companies.

Once you have the monthly costs for your chosen Obamacare plans and for your job-based health insurance, you’re ready to move on to step 4.

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Step 4—Compare the Cost of Obamacare Vs Job-Based Health Insurance

Old fashioned balance scales with each side holding gold coins.
When the actuarial values are similar, the best deal is the health plan that costs the least. Tom Cockrem/Getty Images

Choose the Best Deal

Once you’ve found how much you’ll have to pay each month for your job-based health insurance as well as for the Obamacare plans you’re comparing to it, you’re almost done. If one plan is dramatically less expensive than the others, since they’re all of similar actuarial values, the less expensive plan is the one that gives you the best bang for your buck. Choose that health insurance plan if you’re just looking for the best deal. But keep in mind that other factors, such as the provider network and the covered drug lists, could mean that a more expensive plan actually provides you with the best value.

If Obamacare and Job-Based Health Insurance Are Both Good Deals

If your cost for all of the plans is relatively similar, then you can base your decision on the health plan structure you like best. Evaluate the best fit for your needs by looking at

  • The type of health plan.
  • How the cost-sharing is structured.
  • The health plan’s provider network.
  • The health plan's drug formulary.
  • Health plan quality and satisfaction ratings.

If you like the freedom to go out-of-network and you’re willing to pay a little more for it when you do, consider a PPO or a POS plan. If you don’t mind staying in network to keep your costs low, an HMO or EPO might serve you well. HMO, PPO, EPO & POS—What’s the Difference & Which Is Best?

If you don’t have any savings or couldn’t afford to pay a large deductible, a health plan with a lower deductible but higher copayments or coinsurance rates might make you feel more comfortable.

If you have your heart set on keeping your current primary care physician or specialist, check each health plan’s provider network. Before committing to the health plan your PCP is in-network with, call the doctor’s office to confirm they’re still in-network with that health plan and that they’re not planning on dropping out of its network any time soon.

If you take prescription medications, check each health plan's drug formulary to make sure your specific prescription drugs are covered. My Prescription Drug Isn’t on My Health Plan Drug Formulary. What Now?

Lastly, check the quality and satisfaction ratings for the health plans you’re considering. You can do this with the health plan report cards available on the National Committee for Quality Assurance’s website. All other things being equal, if one has great ratings while another has lousy ratings, the decision will be easy.

Your Employer's Plan Is Likely Your Best Option. But That Might Not Be True For Your Family Members

Keep in mind that in most cases, you're going to find that your employer's plan is the best choice. This is due in large part to the fact that your employer will be paying a chunk of the premium, whereas it's extremely unlikely that you'll get any financial assistance with an individual market plan. Unless there are significant additional factors, such as network coverage, that impact your decision, the cost of the individual market plan is likely to be quite a bit more than the cost of your employer's plan.

But the situation for your family members might not be so clear-cut. If your family is caught by the family glitch, you might find that the cost to add them to your employer-sponsored plan is prohibitively expensive. They're unfortunately still not eligible for financial assistance in the exchange, but they might choose to purchase a less expensive plan (likely with lower actuarial value) in the exchange.

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