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BUYING TIPS FOR INDIVIDUALS
There's strength in numbers, particularly when you're buying health insurance. As part of a group plan, you can enjoy a significant discount on premiums as well as comprehensive policies.
But if you leave that job — or start another one that doesn't offer health insurance — you may be surprised at just how expensive the same coverage is when you buy individual health insurance. ("Individual" means the insurance is not connected to a business or to the self-employed. You can purchase an "individual" policy that covers your whole family.)
In addition, there is no guarantee that an insurer will take you on. That's because unlike group plans, if you have health problems, individual plans are medically underwritten and the insurer may reject your application or attach exclusions to your policy. However, some states don't allow this practice and require that any insurer selling individual health plans must offer you a policy, no matter what medical problems you have.
However, your premiums are still likely to be substantially higher. People 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. To find out what your rights are, contact your state insurance department. You can find the contact information by selecting the state in which you live from the pull-down menu at the top of this page.
Crunching the Numbers
Pricing is probably the most bewildering aspect of individual health policies, so it's worth your while to shop around. For instance, the premiums for similar products from different insurers can vary by as much as 50 percent for the same person. What's more, the rules and regulations about individual health insurance vary from state to state, making comparison-shopping a bear for the uncertain consumer.
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 and cost can be challenging, but it's a necessity. So take your search one step at a time. The first step is to evaluate your needs and understand your health insurance options. For some, that may mean buying COBRA coverage from their former employer.
Consider COBRA
When you leave a job, you don't necessarily need to leave your health insurance behind. Thanks to COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985), certain employers that provide a group health insurance plan must 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, up to 102 percent of the employer's cost. The extra 2 percent is an administrative fee.
COBRA is best seen as a safety net. You have 60 days to make a decision about whether to enroll in COBRA, and when you do, the coverage is retroactive. As soon as you know you will be losing your group coverage, start shopping for individual coverage. Go out and talk to independent agents who represent different companies. If you find a policy you like, apply for it. You should be able to find out if you are accepted within those 60 days. If you find a less expensive 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 works for you but won't cover your wife's pre-existing illness, go with COBRA only for her. To learn more, read Insure.com's "Know your COBRA rights".
A pre-existing condition will make finding individual health coverage more complicated — and more pricey — but that shouldn't knock you out of the race completely. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) restricts the ability of insurers to exclude pre-existing medical conditions from coverage — but only if you were previously part of a group plan and meet certain other strict requirements. Read Insure.com's "The HIPAA law: Your rights to health insurance portability".
Navigating the Individual Health Marketplace
COBRA aside, the individual health insurance market is a wild frontier. The landscape varies from state to state and the rules are constantly evolving. That's why it's imperative to comparison shop. An independent agent well-versed in individual health policies can help you sort through your options and find the policy that's right for you and your family.
Among your choices, you'll find that the individual health market offers the same plans as the group market, including health maintenance organizations (HMOs), preferred provider organizations (PPOs), point-of-service (POS) plans, and traditional fee-for-service arrangements. Your budget, physician preferences, and health requirements will all have a hand in deciding which type of plan is best for you.
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