Term Health Insurance Offers Major Savings over Entry Level Affordable Care Act Plans - Learning Center

NationsHealthInsurance Report | 02-18-2015

Term Health Insurance Offers Major Savings over Entry Level Affordable Care Act Plans

To determine claims that term health insurance is less expensive than any competing individual health insurance products, NationsHealthInsurance.com analyzed the average premiums for term health insurance products from three companies and compared them to the published cost of entry level Affordable Care Act (ACA) or Obamacare plans.

To get an accurate representation of the cost of premiums, information was collected for the following different applicant profiles:

  • 30 year-old female nonsmoker
  • 30 year-old male nonsmoker
  • 40 year-old female nonsmoker
  • 40 year-old male nonsmoker
  • 50 year-old female nonsmoker
  • 50 year-old male nonsmoker

Only the ACA entry level bronze plan premiums were used in the comparison. Bronze plans are the least expensive of the ACA plans.1 In Addition, bronze level plans are the most commonly purchased Obamacare plan for consumers who do not qualify for premium subsidies.2 Because premium subsidies are based on a combination of income and the portion of earnings spent on insurance plan premiums, subsidies for ACA plans were not part of the analyzed data in the study.

The analysis should both men and women in all ages profiles would save with a term health plan over an entry level bronze plan. On average premiums for term health insurance was sixty-six percent less than an unsubsidized ACA plan for the same combination of applicant profiles.

Comparison of Premiums for Term Health Plan and Bronze Level ACA Plans

Age Gender Term Health Insurance Average Premium Obamacare Bronze Plan Average Premium Premium Difference
30 M $62.51 $262.69 -76%
30 F $69.66 $262.69 -73%
40 M $90.76 $295.51 -69%
40 F $103.61 $295.51 -65%
50 M $185.01 $413.16 -55%
50 F $169.85 $413.16 -59%

Applicants age 30 would save the most by purchasing a term health plan. A 30 year old nonsmoking male would save up to seventy-six percent with a term health plan over a bronze level Obamacare plan. Nonsmoking 30 year old females would save an average of seventy-three percent.

Even though the amount of savings for term health insurance decreased with an applicant's age, the premium for term health plans remained cheaper than an entry level ACA plan. On average, term health plan premium quotes for 50 year olds were less than half of the cost of a bronze level Obamacare plan.

Why are Term Health plan Premiums Less Expensive?

Term health plans cost less than an ACA bronze plan because the coverage of the plans is very different. Affordable Care Act plans must include ten essential categories of health coverage known as the Essential Health Benefits. These benefits include standard care such as:

  • Ambulatory care
  • Emergency care
  • Hospitalization
  • Laboratory
  • Maternity and newborn care
  • Mental health and addiction treatment
  • Rehabilitation services and devices
  • Pediatric services
  • Prescription drugs
  • Preventative and wellness services, and chronic disease treatment

Term health insurance plans has a much narrower set of benefits and coverage even from term plan to term plan. Term health coverage does not include benefits such as maternity care, full prescription coverage, and it does not cover pre-existing medical conditions, and applicants who are in poor health will likely be denied coverage.

Methodology

NationsHealthInsurance.com gathered over 1,103 premium quotes for term health insurance products offered by HCC Life Insurance Company, Companion Life (HII), and the IHC Group. Premium quotes were collected on February 12, 2015.

Bronze plan premium averages were taken from an analysis of premiums in 38 states. “Early Gov Data on 2015 Obamacare Premiums Shows Encouraging Trends But Data Incomplete.”

It should also be noted that Affordable Care Act health plan premiums do not differ for men and women who share the same age, smoking status, and region of residence.

  1. Bronze plans are considered entry-level Obamacare health plans because catastrophic plans have enrollee restrictions such as being younger than age 30 or having a ‘hardship exemption.’ The plans also have actuarial values lower than bronze plans. For more information on enrollee restrictions for catastrophic plans, see https://www.healthcare.gov/choose-a-plan/catastrophic-plans/ . If the premiums of all Affordable Care Act plans had been averaged together, from bronze plans through platinum plans, then the average premium for Affordable Care Act plans would have been higher.
  2. The popularity of bronze plans off-exchange is based on an eHealth analysis of over 213,000 individual and family health insurance applications submitted through eHealthInsurance.com between October 1, 2013 and March 31, 2014. "Health Insurance Price Index Report for Open Enrollment and Q1 2014." eHealth. (May 2014). Pp.9-10. eHealth Health Insurance Price Index Report for Open Enrollment and Q1 2014. Last accessed February 12, 2015.
  3. For 2015, the government has reported that the average premium after subsidies are applied for enrollees on the federal exchange, Healthcare.gov, was $105 a month. Jayne O'Donnell. “Tax credits cut average ACA premiums to $105.” USA Today. (February 10, 2015). http://www.usatoday.com/story/news/nation/2015/02/09/average-premiums-tax-credits-obamacare/23134039/ . Last accessed February 13, 2015.