Individual Health Insurance

Individual Health Insurance has become complicated, confusing and expensive, and yet it is one of the most important protections you need for yourself and your family.

Many people are covered through a group plan through their employer. Some employers pay the full cost for the employee, while others ask the employees to contribute to the cost of the plan. Some employers will give an allowance to an employee who is already covered under their spouse’s health plan. Typically in a group plan an employee can cover their spouse and/or children for an extra charge.

One of the advantages that group coverage has over individual health insurance is that many group health plans do not require the employee to qualify physically to be accepted for coverage. The drawback is that changes to your group plan can usually only be made during the company’s annual open enrollment period which makes a group plan less flexible than an individual plan.

Besides through an employer, you may also be able to get group coverage through a club or professional organization you belong to. Some large organizations provide this opportunity as a benefit to their members.

If you do not have access to group insurance, you are one of the many people who needs an individual health insurance policy. Twenty years ago you had a choice of 3 or 4 plans, and the biggest decision was the size of your deductible. No longer! I recently had to insure my granddaughter with an individual health insurance policy and one company I researched offered 30 different plans. It’s a whole new, complicated world.

Here are some insurance coverage definitions that might help as you do your own individual health insurance research:

Indemnity vs. Managed Care: Traditional policies that reimburse your doctor or other healthcare provider for their services is an indemnity plan. Managed care refers to HMO (Health Maintenance Organization) plans. Which type of plan is better for you depends on which is more important to you – controlling the costs, or having the freedom to chose your doctors and specialists as well as having a say in your own health care.

HMO: The goal of Health Maintenance Organizations is to reduce health care costs by focusing on preventive care and managing – through approvals and authorizations – the care provided to patients. While traditional insurers just finance medical care, HMOs actually provide the care for a fixed monthly price (premium) regardless of how much care the patient needs. Good points are the low out-of-pocket costs and the fact that typically there are no lifetime maximum limits. On the down side, non-HMO providers are usually not covered, and sometimes their tight control on care can be a problem.

PPO: A Preferred Provider Organization (PPO) is similar to an HMO, but offers more flexibility and patient control over their health care. As with an HMO you have a primary care doctor who gives referrals to specialists (within the PPO network) as needed, but you have a choice to use providers who are not part of the network if you prefer. Fees for care are paid as the care is received and then you submit a claim to the company to be reimbursed. For in-network providers you typically have a copay. For out-of-network providers you typically have a deductible to meet and higher copays.

POS: The most flexible individual health insurance plan is a Point of Service (POS) plan. It combines HMO and PPO benefits, letting the patient chose how they receive, and pay for, medical care. With a POS plan you can chose to keep your costs low and use the HMO side where you’re limited to network providers. Or if you want to see a specialist that is not in your medical group you can self-refer and use the coverage offered on the PPO side of the plan which of course will be subject to a deductible and coinsurance. Many POS plans also provide coverage (at an even greater coinsurance expense) for you to see a provider is not in the network at all. Obviously a POS plan is the most expensive health care policy.

Deductible: The amount of money the policy holder has to pay for medical services each year before the insurance company begins to cover any of the cost. Not all medical services are subject to the deductible, which means that the fee you pay for those services does not count as part of your deductible. It’s important to pay attention to this when looking for a plan.

Copayment: The patient’s portion of the fee for medical services. With an HMO plan and some PPO plans you will pay a copayment (or copay, typically $10-$50) each time you go to the doctor.

Coinsurance: In an indemnity plan, after you’ve met your deductible, you and the company will share the cost of your medical expenses until you have paid the specified amount of money set as your maximum for the year. Your portion of this shared amount (you would typically pay 20%-40% of each expense) is typically called the coinsurance, although sometimes it is also referred to as a copayment.

Annual Out-of-Pocket Maximum: The most you would have to pay for covered medical care in a given year. This includes your deductible and coinsurance payments, but it doesn’t include the cost of those services that are not subject to the deductible.

Lifetime Maximum: Some policies have a cap for how much they will pay for your health care over the life of the policy. This is an important consideration when buying a policy. If you remain relatively healthy this cap is never an issue. However, if you develop a disease that requires a lot of ongoing care you can reach this maximum quickly and then you no longer have health insurance. This can be devastating. If you are beginning a family it’s especially important to consider this. If your budget will support it, a policy without a lifetime maximum is the best option.

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