Choosing an Individual Health Plan

Finding affordable healthcare can be a daunting task. One option to consider is to purchase an Individual Health Insurance Policy. "Individual" health insurance means the plan is not offered through an employer or a group, but is purchased directly by an individual or family.

Even though your employer offers health insurance benefits, it can pay to comparison shop in the individual health plan market. For instance, it may be less expensive to cover your dependents separately under an individual plan than through your employer-sponsored plan. Or, if you are covered under COBRA, more cost-effective options may be available in the individual plan market. Finally if you are a pre-65 year old retiree, an individual plan could save you money.

Individual plans – Advantages and Disadvantages

Individual and Family Plans

Advantages
  • Individual plans are often more affordable
  • You can choose between many different plan designs and health plan companies
  • Most plans provide a creditable coverage credit which will count towards reducing any pre-existing condition waiting periods under other health plans
  • While your premiums may increase if you develop a medical condition, most plans are guaranteed renewable
Disadvantages
  • Plan coverage levels are usually not as comprehensive as employer group plans
  • You may be declined coverage or charged higher premiums based on your medical history
  • Your premiums will most likely increase with age and claims history

Short term plans (coverage for 6-12 months)

Advantages
  • The application process is simplified and oftentimes coverage starts immediately
  • The plans are very affordable, because it is a limited benefit (the duration of the plan is 6-12 months and does not cover pre-existing conditions)
Disadvantages
  • You may be declined coverage or charged higher premiums based on medical history
  • No preventive care coverage
  • Does not provide credible coverage credit towards pre-existing condition limitation waiting periods under group coverage
  • Not guaranteed renewable: once the plan comes to term, you will have to requalify

Individual plans and pre-existing conditions

If you decide to purchase individual insurance, the health insurance plan will consider your age along with any "pre-existing conditions" to determine your premium. A "pre-existing condition" is a health condition that was diagnosed or treated within a certain time frame before a new health insurance policy goes into effect. Individual insurance plans can exclude care related to pre-existing conditions. Most employer-based plans do not have pre-existing conditions exclusions.

If you do have a pre-existing condition, your options range from continuing on your group plan to enrolling in specially-designed individual options. While these plans are more costly, they do provide access to coverage for those who may have difficulty obtaining other insurance.

  • COBRA - COBRA allows you to continue your group coverage after you have left your employer. However, COBRA coverage can be pricey. If you are relatively healthy, explore obtaining a less expensive individual policy (although, if you develop a serious health condition, your premiums may increase upon policy renewal). As you evaluate your family's needs, consider enrolling those with pre-existing conditions in the COBRA plan, while researching individual plans for other family members.
  • HIPAA Plans - You may be able to buy an individual plan without worrying about pre-existing condition exclusions. Most states require that all health plans operating within that state offer "guaranteed-issued" plans, often referred to as "HIPAA" plans. In order to qualify for a HIPAA plan, you need to enroll within 63 days of your last coverage date, you must have had insurance for the last 18 months with the most recent insurer being an employer-sponsored group plan and you must have exhausted COBRA coverage, if available.
  • Conversion Plan - If you are ending group coverage, you can sometimes transition to a guaranteed-issue individual plan through the same carrier that you had through your employer. Under the conversion plan, you must have had group coverage for at least 3 continuous months just prior to your enrollment with the conversion plan. Furthermore, you need to exhaust COBRA coverage, if you qualify for it.

Things to consider when choosing individual health insurance

  • What type of plan is it? Individual plans come in many flavors. There are HMOs, PPOs, and high deductible plans that are often coupled with a Health Savings Account. (For more on these options, request CareCounsel's "Choosing a Health Plan" tip sheet.)
  • Compare coverage between individual plan choices and between any group options offered by your employer. Pay particular attention to lifetime maximums in case you develop a catastrophic illness. Also, review the fine print of the health insurance contract to understand limitations and exclusions. The following are important points of comparison when doing your research:
    • What is the deductible (the amount you pay before the health plan pays any claims)?
    • What is the annual out-of-pocket maximum (the amount you pay before the health plan pays covered expenses at 100%)?
    • Is there coinsurance or copayments for hospitalization? (if so, is it per admission or per day?)
    • What's the coverage for preventive care?
    • Are there any limitations on physician visits? (Some lower cost plans will convert to a higher share-of-cost after the first few office visits.)
    • If it's important, is there coverage for pregnancy?
  • Make sure the doctors and hospitals in the plan's network match your family's needs and preferences. Call up a couple of doctors and see if they are taking new patients through that insurance plan.
  • Review the pharmacy benefits. Check to see if your medications (or similar alternatives) are on the plan's formulary. See if there are any annual dollar limits on the drug benefit.

How do I find an Individual Plan?

The best way to shop for and to compare individual health plan coverage options is to use the internet for side-by-side comparison of plan benefits and costs.

  • Over the past decade, CareCounsel has worked with eHealthInsurance.com. eHealth lets you make side-by-side health plan benefits and cost comparisons. They offer a wide selection of plan options in all fifty states. Getting a quote is easy. You can even complete the paperwork to purchase the insurance directly on-line or speak with one of their staff about health plan options before making a decision. You may also access eHealth by visiting the "Resources and Links" section on www.carecounsel.com.
  • If you are not an internet user, you can always contact a local health insurance agent. The agent receives a commission from the firms he represents, so recommendations may be influenced by various sales incentives.
  • Contact the health plan directly, especially if you're interested in a conversion plan.
  • Since individual health insurance premiums are regulated in most states, you'll pay the same monthly premium for the same plan, no matter where you buy it.

Other options

There may be other options available to you and your family. If you meet eligibility requirements, you might be able to enroll in entitlement programs like Medicaid or in "high risk" plans targeted at individuals unable to purchase insurance elsewhere. Many states offer programs designed for the healthcare needs of children or pregnant women, such as Healthy Families, Child Health and Disability Program (CHDP) and Kaiser Cares for Kids. Check with your local or state government for such programs and their eligibility requirements. The Foundation for Health Coverage Education at 800-234-1317 offers assistance identifying free or low cost options. They also have a health insurance option guide available on their website at www.coverageforall.org.

For more information, contact CareCounsel at 1-888-227-3334.

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