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Tips for buying individual health insurance

By Insure.com
Last updated March 10, 2010

There's strength in numbers, particularly when you're buying health insurance. As part of a group plan at work, you can enjoy a generally lower rate on premiums — but sometimes a group health plan may not be an option.

If you leave your 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.

An individual plan is one purchased on the private market, not tied to workplace benefits. Although they are called "individual" plans, they can cover you, your spouse and your children.

There is no guarantee that an insurer will accept you for an individual policy. Individual plans are medically underwritten and the insurer may reject your application or attach exclusions to your policy if you have health problems. Under "guaranteed issue" laws, some states don't allow this practice and require that health insurers offer you a policy, no matter what medical problems you have. The Kaiser Family Foundation has a list of guaranteed issue laws.

People enrolled in individual plans pay premiums determined primarily by their expected health care costs, so prices will be higher for those who are older and/or less healthy.

Crunching the numbers

Pricing is probably the most bewildering aspect of individual health policies, so it's worth your time to shop around for health insurance quotes. For instance, premiums for similar products from different insurers can vary by as much as 50 percent for the same person.

If you're faced with finding individual health insurance, don't let any 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 forced into "medical bankruptcy." 

Plus, you'll lose your rights to coverage of pre-existing conditions if you go without insurance for 63 days or more, a time period set by the Health Insurance Portability and Accountability Act (HIPAA).

How to choose an individual health insurance plan

When shopping for an individual health insurance policy, it pays to do your homework. According to Cheryl Leamon, spokesperson for Blue Cross Blue Shield Anthem, ask yourself these key questions:

• Do I want to keep my doctor?If you have a particular physician you like, that might dictate whether an HMO or a PPO is right for you. In an HMO, you must use the plan's network of doctors in order to receive coverage. A PPO plan will let you visit any doctor.
• What is my household's current and anticipated health care need?Consider the services you and your family will need on a regular basis. If your child has asthma, will he have to see an asthma specialist routinely to keep it under control?
• What will my out-of-pocket expenses and monthly premiums cost? Does it make sense for me to pay a higher premium for lower out-of-pocket costs? If you want a comprehensive health plan — and don't want many of out-of-pocket expenses — an HMO provides a very cost-effective plan. But if you're in your 20s or 30s, have no children and some extra savings, you can possibly save money by buying a policy that covers only catastrophic illnesses. Remember, though, you'll have to pay out of your own pocket for routine doctor visits and laboratory tests.

To estimate health plan costs, try this health care insurance cost calculator from Money-Zine.com.

• Does the plan cover prescriptions and X-rays?Prescriptions are one of the most used benefits of health plans. Review the coverage of any health plan to determine if your current prescriptions are covered and at what level. X-rays are a routine part of some treatments, so it's wise to make sure X-rays are covered in each plan you consider.
• Do I prefer certain specialists?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 about coverage for these services. Psychotherapy and other mental health services will likely have specific limitations as well.
• What do I look for if I can't afford a policy that covers routine care? Look for comprehensive   plans with higher deductibles rather than cutting back on coverage. A basic hospital/surgical plan might cost less, but if you end up in the hospital, the last thing you need to add to your list of worries is how you're going to pay for follow-up care once you're released.
• What will it cost me for emergency care?Look at what costs, including co-pays or co-insurance, or services such as hospital and surgery care, apply towards the deductible. Leamon advises looking at what defines "emergency care" in your policy.

"Some policies may pay for a broken leg or an injury due to an accident, but won't cover an illness you were treated for in the emergency room. And still other more affordable plans will cover a visit to the emergency room, but not an extended stay in the hospital. Since emergency care can be the most costly in any health plan, it is best to read the fine print," she says.

Individual coverage at a group rate

In some states, if you are a self-employed sole proprietor, you can be eligible to buy health insurance as a "group of one" — even a home-based one — if you can show that you've been in business for at least 30 days. The Kaiser Family Foundation has a list of states where you can buy guaranteed issue "group of one" health plans.

If you live in a state that does not offer "group of one" insurance policies, you might still qualify for a group rate if you own a business and have at least one 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.

If you're leaving an employer where you had a group health plan, you can ask the insurer to convert the coverage to an individual health plan. The rate will be higher than your group plan, but it's a way to secure health insurance if you have medical conditions. Or, if your spouse has a group plan at work, he or she can add you on.

For more about the types of plans available, read health insurance basics.