Health insurance costs continue skyrocketing across America, causing millions of Texans to ask: What is the cheapest health insurance in Texas?
The lowest premium policies in Texas are subsidized by either employers or the federal government. They include a) entitlement programs, b) employer-sponsored coverage, and c) Marketplace (healthcare.gov) subsidized plans.
Do you qualify for these low-cost options? In this article, we detail the qualifying standards for Texas entitlement programs and Marketplace subsidized plans. In addition, we analyze options for Texans who are ineligible for both employer-sponsored plans and government subsidies.
To uncover the most cost-effective health-plan options, I draw on my experience as an insurance agent for individuals and small businesses. In addition, I rely on statistics gathered from expert sources to create a guide to finding the best health insurance options in Texas for your family.
$0 Premium Health Insurance Options in Texas
By far, government-subsidized healthcare offers the lowest cost premiums in the State of Texas. CHIP (government-sponsored healthcare for children of low-income families), Medicaid, Medicare, and $0 premium Marketplace policies offer value beyond the capability of the private market.
For no fee, recipients receive generous benefits because these plans must be Affordable Care Act (ACA) compliant.
ACA compliant health plans include ten essential health benefits:
- Chronic disease management, preventive care, and wellness services
- Outpatient care
- Emergency services
- Laboratory services
- Prescription drugs
- Mental health and substance use disorder services
- Rehabilitative or habilitative services and devices
- Maternity and newborn care
- Pediatric services
Out-of-Pocket Expenses for Health Insurance Entitlement Programs
CHIP- and Medicaid recipients have few out-of-pocket expenses because the plans cap them at a low level.
Medicare beneficiaries often accrue substantial out-of-pocket costs. This is because Medicare requires deductibles and pays 80% of medical expenses after they are met. To defray healthcare expenses, many seniors carry Medigap insurance, which covers deductibles and co-insurance.
$0 premium plans from the Marketplace provide significant financial assistance to those who qualify, but they come with out-of-pocket expenses. As with Medicare, there are deductibles and co-insurance requirements.
Qualification Standards for CHIP and Medicaid in Texas
CHIP- and Medicaid qualifications are based on means tests. The means tests for these programs require that applicants make below a certain income based on household size. CHIP and Medicaid have starkly different means tests in Texas.
Children under 19, their parents or caregivers, and pregnant women can obtain medical insurance for their entire household under either CHIP or Medicaid if they make below the following income levels:
Medicaid for Childless Texans
Childless healthy adults do not qualify for Medicaid under any circumstances. The disabled qualify if their income sits below 74% of the federal poverty level (FPL). The FPL is $12,880 for 2021. Parents and caregivers of children qualify if their income is below 14% of the FPL.
Cost Sharing for CHIP and Medicaid in Texas
Texas does require CHIP and Medicaid recipients to bear the cost of co-pays. The amount varies by service but can be as low as $5. The state caps the cost-sharing amount at 5% of income during the benefit period.
Employer Subsidized Insurance Costs in Texas
Except for zero-premium plans, Texans with health coverage through their employers enjoy the lowest premiums. In fact, more than 13 million Texans receive their health insurance through an employer.
The average employer-sponsored health insurance premium for a single person in Texas stands at $468 per month. On average, employers pick up 82% of this cost for singles and 70% for families. The result is a reduction in the annual premiums to $1,242 for singles and $14,561 for families.
The cost of that insurance continues growing far faster than inflation, resulting in workers’ share of the burden growing. In 2019, Texas employees spent an average of 13.5% of median income on health insurance, an increase of over $8,000 per worker over the last decade.
Employees concerned about high premiums and out-of-pocket expenses should consider a flexible spending arrangement (FSA) if offered by their employer plan. FSAs allow monthly, tax-free contributions toward healthcare savings.
Marketplace (ACA) Subsidized Insurance Costs
Not all applicants on the Marketplace qualify for $0 premium plans, but 85% do qualify for subsidies. Eligibility for these subsidies requires that households make between 100% and 400% of the FPL for their family size.
For example, the average cost of a Marketplace policy stands at $568/month. However, a 40-year-old living in Arlington, Texas, and making $37,000 qualifies for a bronze plan for just $147 a month after the subsidy.
Marketplace plans have robust coverage due to ACA compliance rules, but premiums vary significantly because of different deductible options. For those with high medical expenses, low deductible plans usually result in the smallest out-of-pocket expenses. Policyholders who typically spend little on healthcare may save by opting for a higher deductible plan.
Ten solid and reputable insurance companies offer marketplace coverage in Texas, including:
- Scott and White
- Friday Health Plans
Non-ACA Compliant Health Insurance Policies
The average Marketplace premium for unsubsidized customers is $568/month, while the average for off-exchange premiums is $468/month.
What if you have no employer-sponsored health insurance, make too much to qualify for Marketplace subsidies, and cannot afford market-rate health insurance?
In Texas, you may qualify for non-ACA compliant plans, which have lower premiums than the ACA-compliant plans on the open market.
Non-ACA compliant plans have some severe disadvantages but compared to having no health insurance, they are a much better choice. People with no insurance face many obstacles, including the following:
- Inability to gain admission to certain hospitals
- Inability to get appointments with many doctors
- Longer waiting periods to see a physician about a concern
- Necessity of going to the emergency room for non-emergencies
- Being charged the highest price for services and medicines
- Inability to receive adequate treatment for life-changing and potentially fatal diseases and injuries
Many non-compliant plans allow you to receive the care you need promptly. They also have contracts for lower billing rates, which can save a bundle on out-of-pocket expenses. However, they come with many drawbacks:
- Certain conditions may not be covered
- Specific procedures/services may not be covered
- Many have no prescription drug coverage
- Limited coverage area
- Limited networks
- High deductibles
Many insurers offer non-compliant plans on a short-term basis. These plans last just 12 months, though some are renewable for up to 36 months.
Because they offer limited coverage for services, they are most appropriate for people in transition who will later gain employer-sponsored coverage, qualify for Marketplace subsidies, or be able to afford unsubsidized, individual coverage.
Reputable insurers offering short-term plans in Texas include the following:
- Companion Life
- Everest Reinsurance
- Independence American Insurance Company
- National General
- Standard Security Life Insurance Company
- United Healthcare (Golden Rule)
- United Security Health and Casualty
Unlike Marketplace plans, non-compliant plans can discriminate based on pre-existing conditions. As a result, being under 65 and in relatively good health are requirements for some of these policies.
Private Market Full Price Insurance Costs in Texas
Private market insurance has, on average, lower premiums than non-subsidized Marketplace policies. However, this does not mean that potential or realized out-of-pocket expenses would be less. In addition, Marketplace plans are barred from denying coverage for pre-existing conditions or excluding services based on health history.
For these reasons, those with pre-existing conditions may only qualify on the Marketplace or find more comprehensive, less costly insurance there.
The choice of policies on the individual market boils down to a tradeoff between premiums, out-of-pocket expenses, and freedom to choose your own providers.
The options are as follows:
A health maintenance organization (HMO) offers the most effective solution to obtain both the lowest premiums and minimize out-of-pocket expenses.
An HMO consists of a network of specialists, doctors, and hospitals that have agreed to lower rates. If you remain within the network, there are no deductibles, co-pays, or co-insurance.
Members choose a primary care physician (PCP) from the network. To see a specialist, you first need to visit your PCP and obtain a referral. Any doctor you see must be in the HMO, or you bear the total cost of the visit. However, the plans do cover out-of-network charges for emergency room visits and any resulting hospital admissions.
Preferred Provider Organizations (PPOs) are similar to HMOs in that they have a predefined network of providers. However, they differ in that no PCP referral is needed to visit a specialist. In addition, PPOs still provide coverage for out-of-network doctors and hospitals, though at a lower percentage. In addition, you will have a deductible, as well as co-pays and co-insurance, resulting in far more out-of-pocket expenses versus an HMO.
Reducing premiums on a PPO plan requires increasing out-of-pocket costs with higher deductibles, co-insurance, and co-pays. If you take out an IRS-qualified high deductible plan, an HSA can help defray these expenses.
With a point-of-service plan (POS), you pay the upfront cost to your doctor or hospital and receive partial reimbursement from the insurance company. This arrangement gives you the maximum freedom to choose doctors and hospitals, and referrals are never required.
The tradeoffs are that POS plans pay a lower percentage of healthcare costs and often have high premiums. For those willing to pay the extra money, confinement to a network need never become a problem.
Marketplace Unsubsidized Insurance Costs
Though Marketplace unsubsidized premiums are higher on average than private market premiums, they may offer a better value. Because they cover the ten essential health benefits and ban pre-existing condition discrimination, the total costs, including out-of-pocket expenses, are lower for some customers.
Costs depend on plan level, with Texas premiums averaging $301 monthly for bronze plans, $420 for silver, and $429 for gold. These averages are for the lowest premiums in these categories, which means higher deductibles.