Choose and Use Individual Health Plans

By Mike Roberts

When you're buying health insurance as part of a group plan, you enjoy policies that are comprehensive policies and generally premiums that are affordably passed on to you via the employer.

If you leave that job, or start one that doesn't provide you or your family with a health plan, you may be surprised at just how expensive the same coverage is when you buy individual health insurance.

To further gum up the works, there is no guarantee that an insurer will take you on. Individual plans are medically underwritten and the insurer may reject your application, unlike a group plan.  Unfortunately, premiums can be substantially higher, because. those enrolled in individual plans pay premiums that are more in line with their expected health costs, so the premiums will be higher for those who are older or less healthy.

Price vs. benefits

Price vs. benefits is probably the most bewildering aspect of individual health plans. In California, premiums for similar products from different insurers can vary by as much as 50 percent for the same person.  Why the differences?  Many plans provide similar coverage to what group plans offer, which is more comprehensive, while other plans tend to offer plans that will co-share the smaller bills.  Size and network also makes a difference, particularly in California, the larger carriers are able to negotiate better rates with their providers than some of the smaller companies.

If you're faced with finding individual insurance, don't let the confusion tempt you to go without. Even if you're healthy, you could fall off a ladder or have a serious car accident and be financially ruined. Plus, you'll lose your pre-existing-conditions coverage in most states if you go without insurance for more than 63 days.

Finding the right balance of coverage can be challenging, but it's a necessity. Seek the advice of a broker who routinely works with multiple carriers, they know the products and it doesn’t  cost anything extra for their services.  Take your search one step at a time, understand your health insurance options and if in doubt as to what to do, buying COBRA coverage from your former employer may be an option to look at..

COBRA Choices

COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985), requires certain employers that provide a group health insurance plan to offer most employees who would lose their coverage the option to continue it for up to 18 months.  The catch is that the employee will have to pay the full premium that is charged the employer plus a possible 2% extra for administration fees.

COBRA is best seen as a safety net. Try not to be drawn into the trap of hanging onto the plan the full 18 months if you can avoid it. You have 60 days to decide whether or not you wish to take advantage of your COBRA option, when you do, the coverage is retroactive. We recommend you begin shopping for individual plans as soon as you know you may be losing your group coverage.  Remember, the individual plans are medically underwritten, so the sooner you can choose and switch, generally speaking the better of you are. You should be able to find out if you are accepted within that 60-day period. If you find a policy that meets your needs, buy it. If not, you can still elect COBRA.

COBRA covers all members of your family; so if you find an individual policy that won't cover your spouse’s pre-existing illness but it will work for you, you can elect the COBRA option just for your spouse.  

Pre-existing conditions make finding individual health coverage more complicated.  It doesn’t knock you out of the game totally.  Fortunately the Health Insurance Portability and Accountability Act of 1996 (HIPAA) restricts the ability of insurers to exclude pre-existing medical conditions from coverage if you were previously part of a group plan  with continuous coverage and meet certain other requirements.

What’s out there that works for me

The individual health insurance marketplace is a dynamically changing environment, to put it mildly. The rules are constantly evolving and the plan designs are always adjusting to legislation and rising health care costs.. Health care in America is changing rapidly. Twenty-five years ago, most people in the United States had indemnity insurance coverage. A person with indemnity insurance could go to any doctor, hospital, or other provider (which would bill for each service given), and the insurance and the patient would each pay part of the bill.

But today, more than half of all Americans who have health insurance are enrolled in some kind of managed care plan, an organized way of both providing services and paying for them. Different types of managed care plans work differently and include preferred provider organizations (PPOs), health maintenance organizations (HMOs), and point-of-service (POS) plans. Ultimately your budget, physician preferences, and health requirements will contribute to the decision as to which type of plan is best for you.

When shopping for an individual health insurance do your homework, determine what is most important to you and work from there.

If you have a particular physician in mind, that might dictate whether a PPO or an HMO is right for you.   Most plans are network oriented, if keeping that physician is important, be sure to confirm that they are part of the network of the plan you are choosing. Keep in mind that some plans limit not only your visits but also whom you can see.  Psychotherapy and other mental-health services will have specific guidelines and limitations as well.

If you can afford to pay for routine care on your own, look for comprehensive inpatient/outpatient plans with higher deductibles rather than trimmed-down hospital/surgical plans. A hospital/surgical plan might cost up to 40 percent less, but if you end up in the hospital, your follow-up care once you get out of there probably will not be covered.

If you want a comprehensive plan and don't want a lot of out-of-pocket expenses, an HMO provides a very cost-effective way to get care or a low deductible PPO.  If you're in your 20s or 30s, have no children, some extra savings, you may wish to consider a policy that co-shares the smaller bills and covers you for the high end catastrophic coverage. Consider the annual premiums, the deductibles, co-payments, annual limits, and maximum out-of-pocket expenses. This should give you a good idea of what your yearly costs will be for each policy. Don't let a "cheap" policy fool you. Make sure you check whether the "best buy" will give you access to the kinds of services you might require.

Finding an efficient and reasonably priced individual health policy is not rocket science. Talk to other people around you who are in the same circumstances, don’t let the search frustrate you. If you do your homework and enlist the knowledge your local broker has about the regional market, you'll find the health insurance policy that's right for you.

Sources of Additional Information

Many organizations have information that can help you understand your health care choices. Some helpful materials and contacts are listed.

General Information

Checkup on Health Insurance Choices
Questions To Ask Your Doctor Before You Have Surgery
Agency for Health Care Policy and Research
Publications Clearinghouse
P.O. Box 8547
Silver Spring, MD 20907
800-358-9295