Sunday, September 9, 2007

Tips for buying individual health coverage


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. Individual plans are medically underwritten and the insurer may reject your application or attach exclusions to your policy if you have health problems. 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 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.

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 difficult for the 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 (an interval afforded by the Health Insurance Portability and Accountability Act (HIPAA).

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.

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. 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.

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 compare multiple companies when you 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.

Cutting corners: How to lower your costs

When shopping for an individual health insurance policy, it pays to do your homework. Ask yourself the following key questions:

  • How important is it that I keep the doctor I have now?
    If you have a particular physician in mind, that might dictate whether a PPO or an HMO is right for you, depending on whether he or she belongs to that insurance company's network.

  • Do I prefer certain specialists?
    Keep in mind that some plans limit not only your visits but also who you can see. If you want to see an acupuncturist or chiropractor, be sure to ask your insurance agent or broker about coverage for these services. Psychotherapy and other mental-health services will probably have specific guidelines and limitations as well.

  • What are my health insurance goals?
    If you want a comprehensive plan — and don't want many of out-of-pocket expenses — an HMO provides a very cost-effective way to cover you from womb to tomb. But if you're in your 20s or 30s, have no children and some extra savings, you can save by buying a policy that covers only catastrophic illnesses. Remember, though, you'll have to pay out of your own pocket for every routine doctor's visit or laboratory test.

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, the last thing you need is to worry about how you're going to pay for your follow-up care once you get out of there.

If you are leaning towards a more well-rounded plan, make sure you understand what youre getting. Read the fine print. Will your plan pay for X-rays? Will it cover your doctor's visit if you have the flu? Will it cover prescription drugs?

The Agency for Health Care Policy and Research offers guidelines for estimating your future health care costs and comparing several policies. 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.

Join the group

Depending on the state in which you live, your options might be more varied — and even more confusing. In Florida, for instance, a self-employed, sole proprietor can be eligible to buy health insurance as a business — even a home-based one — if he can prove that he's been in business for at least 30 days.

If you live in a state that does not offer these "group of one" insurance policies, you might still qualify for a group rate if you own a business and have at least one other partner or employee. Does your spouse do some bookkeeping for your company? That's a two-person business, eligible for a group rate and a group policy.

But even if you're not in business, don't consign yourself just yet to buying an individual policy if you prefer group insurance. You may be able to find a group plan through your fraternal organization, alumni association, trade association, or your chamber of commerce. All of these are potential sources of group health insurance.

Finding a cost-effective individual health policy can be tricky but it's not rocket science. Talk to other people around you who are in the same circumstances. Do your homework and you'll find the health insurance policy that's right for you.

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