Although both gap health insurance and ACA health insurance plans (or Obamacare) are considered major medical insurance plans, there are significant differences between them. You should carefully analyze your situation to determine which plan is right for you.
Minimum Essential Coverage (MEC)
ACA health insurance plans are guaranteed issue; you can't be denied coverage based on pre-existing conditions. ACA health insurance plans must provide the following 10 essential health benefits:
- Outpatient care (doctor visits or other services that don't require hospital admission)
- Emergency room visits
- Inpatient care (treatment in the hospital)
- Maternity and newborn care (pre-natal and post-natal care)
- Mental health and substance use disorder services including behavioral health treatment, counseling and psychotherapy
- Prescription drugs
- Physical and occupational therapy, speech-language pathology, psychiatric rehabilitation and more. These services and devices would help you recover if you are injured or have a disability or chronic condition.
- Laboratory tests
- Preventive and wellness care including counseling, screenings and vaccines to keep you healthy and care for managing a chronic disease.
- Pediatric services including dental and vision care
Gap health insurance plans, on the other hand, have several limitations.
Keeping ACA health insurance year-round is necessary to avoid tax penalties. Being enrolled in a gap health insurance does not allow you to avoid ACA tax penalties.
However, there are numerous exemptions for ACA tax penalties:
- You were not enrolled in ACA health insurance plan for less than three months in a calendar year. Short term health insurance is currently allowed for up to three months.
- Your income is below the tax filing threshold, so you don't file an income tax return.
- The cost of enrolling in ACA coverage is more than 8% of your household income.
- Your application for Medicare or Children's Health Insurance Program (CHIP) coverage was denied.
- You experience certain hardships such as homelessness, medical debt or bankruptcy.
There could be other reasons you would be exempt from the tax penalty. You should discuss your specific situation with an attorney or tax professional.
You can only enroll in ACA plans during an annual open enrollment or during Special Enrollment, if you qualify. With gap health insurance, you can enroll whenever you like, and coverage can start from the next day onward.
Federal Tax Subsidies
When purchasing ACA health insurance, depending on your income and household size, you may qualify for federal tax subsidies.
When purchasing gap health insurance, however, no one is eligible for federal tax subsidies to offset the premium. In most cases, the gap health insurance premium is significantly lower than ACA health insurance.
Choice of Healthcare Providers
In many states, ACA health insurance plans only provide HMO plans which don't cover out-of-network doctors. HMO plans also prevent you from visiting a specialist before visiting a PCP (primary care provider) for referral.
On the other hand, most gap health insurance provides the flexibility to visit any doctor. Many gap health insurance plans are PPO plans that have a wide variety of healthcare providers across the country that you can visit without a referral from a PCP. Of course, if you visit providers within the PPO network, your out-of-pocket expenses will be even lower.
While ACA insurance plans are required to cover prescription drugs, most gap health insurance plans don't cover prescription drugs, and some cover only inpatient prescription drugs.
Depending on any pre-existing conditions, you may be declined from receiving gap health insurance coverage. If you are approved for gap health insurance, pre-existing conditions will not be covered.
ACA health insurance plans, on the other hand, are guaranteed issue. You can't be turned down for pre-existing conditions, and they will be covered as long as you continue paying the premium. You can also make changes to your plan during open enrollment or Special Enrollment if you qualify.
Those with certain chronic medical conditions, complex medical needs or poor health should enroll in an ACA plan; gap health insurance doesn't cover these needs. Further, if you have had these pre-existing conditions within the past five years, you may be ineligible to enroll in gap health insurance.
Of course, everyone who is eligible for an ACA plan should enroll as soon as possible.