If you don’t have health insurance through your employer, or your spouse’s employer, you can either buy an individual health insurance plan, a family plan, or a group plan through a trade group or credit union to which you belong. The costs will be higher, but the cost of not having insurance is much higher. More than 50% of all bankruptcies are caused by medical bills.
This basic overview of your options and methods for saving money on insurance can help you wade through the process of buying private health insurance. If you don’t want to compare quotes manually, a site like NetQuote can help you get several quotes for health insurance.
Types of Individual Health Insurance Plans
Group plans, usually through an employer, offer the best coverage at the lowest cost because you can’t be rejected due to pre-existing conditions. Individual health insurance coverage isn’t as extensive, but you can find a plan to suit your needs and your budget. Plans come in four primary types:
Indemnity
Indemnity coverage is best for young, healthy people. Most indemnity plans have a very high deductible. You also often have to pay the total cost up front and then file a claim for reimbursement. This option has two benefits: low annual premiums and complete flexibility to see any doctor, any time.
Preferred Provider Organization (PPO)
A PPO controls costs by limiting coverage to in-network doctors and hospitals. When you opt for a PPO plan, you don’t have to choose a Primary Care Physician (PCP), and can see an in-network doctor without a referral. Most plans include a deductible, which you have to pay before your coverage kicks-in. You’ll pay a co-pay when you visit the doctor, but the doctor then bills your insurance. In most cases, preventative care visits are covered, but you’ll have to pay the negotiated rate for tests until the deductible is met. Some also require co-insurance after the deductible is met, which means that you pay a set percentage of the total cost, often 30%.
Health Maintenance Organization (HMO)
An HMO offers a limited number of doctors and hospitals that you can choose from. You’re also required to choose a PCP. If you need to see a specialist, your PCP must provide a referral. You may have a small co-pay, but there’s no deductible to meet. Most have no or very limited out-of-network coverage. Premiums are usually lower than those of a comparable PPO because of the limits.
Point of Service (POS)
POS coverage combines an HMO and a PPO. You choose a PCP, but pay no deductible for care provided by the PCP. Most plans require referrals if you need to see specialists. They may also provide limited out-of-network coverage.
How to Choose an Individual Health Insurance Plan
When choosing a family or individual health insurance plan, first review the coverage offered by different plans from a few different companies. You should also check with the state insurance commissioner’s website to see how each plan rates in your area. None of the reviews will be great, but some are better than others.
Note: if you have a pre-existing condition, you will probably be charged a higher rate, regardless of how minor it is. My husband had a hospitalization as a result of a car accident and one insurance company offered a ridiculously high rate because it had been within the past year, never mind that he wasn’t at fault and didn’t plan to repeat the injury.
You should also compare the various deductibles. Most have a medical deductible and a prescription deductible. If you add dental coverage, expect to find a third deductible. If all you need are semi-annual cleanings, skip the insurance. The premium costs more than paying the dentist directly.
When my husband and I got married, we didn’t have employer-provided coverage. We combined our individual health insurance plans into a family plan, and opted for a PPO with a $2500 deductible because the premium was $100 a month less than the plan with a $1500 deductible. Paying an extra $1,200 to save a possible $1,000 didn’t make sense to us.
If you can, deposit the premium difference between the lower deductible plan and the plan you choose into a savings account. That way you’ll have the money to cover the deductible if you need it, but the money is yours to keep if you don’t need it.
How to Apply for Individual Health Insurance
Most applications can now be completed online. Although it’s tempting to leave out some conditions, past surgeries, or other factors that might increase your rate, don’t do it. If you intentionally exclude information, your insurance could be cancelled just when you need it most. In addition, they will probably find out anyway, so lying only makes you more likely to be declined.
You usually have to submit the first payment with the application, and the money will be refunded if you’re declined.
When to Apply for Individual Health Insurance
You should apply for insurance the moment you discover you will soon be without it. If you’re leaving your job and your new job has a waiting period before your coverage is active, see if you can buy COBRA coverage for the gap.
If you don’t qualify for COBRA, and only need coverage for a few months, you can apply for a short-term plan. If you don’t know how long you’ll need coverage, buy an annual individual health insurance plan. You can pay annually, semi-monthly, or monthly, so choose the payment plan that works best for you.
Whatever you do, don’t risk going without insurance. My parents’ friends decided they could do without coverage for three months, but the husband had a major heart attack one month after their coverage lapsed. Fortunately, he was a valuable enough employee that his new employer paid for his car, but don’t count on your new employer doing the same. Unlike renter’s insurance or auto insurance, everyone eventually needs to use their health insurance.
