Buying Individual Health Insurance

As new health care legislation hangs in the balance, thousands of Americans continue to go without health insurance. Worse yet, as companies continue to reduce jobs, people lose health care insurance benefits as well as the income necessary to purchase an individual policy.

What to do? If you’ve lost your insurance or your COBRA coverage is due to expire soon, it’s time to do your own shopping for individual health care coverage to compare prices and coverage options.

One key point to remember: If you currently have coverage, even COBRA, do not let it lapse till you find another policy. Coverage gaps result in higher premiums for new policies.

There is a lot to consider with health insurance, not the least of which is the general health and ages of members of your family. For example, children under five tend to get sick more often and require office visits. And allergies or asthma, once diagnosed, can remain a stickler for higher premiums even if your child has a mild case or grows out of it.

As you shop options, consider the following questions to help you evaluate the best plan for your family:

• Are the doctors, hospitals and other providers you prefer covered as “in-network” or “out-of-network” under the plan?
• What is the coverage for services within the plan’s network?
• What is the coverage for services out of the plan’s network?
• Are any services covered 100% (such as preventive care)?
• Do these services require a co-pay?
• Is there a deductible? Is it different for you versus your family?
• If so, can you adjust it to lower the premium that you pay?
• What is the co-pay for a primary care physician visit? Specialist visit?
• Are all prescriptions covered? Are some covered and some not (which ones?)
• How much coverage is provided for prescriptions? (sometimes there are tiers – some medications get more coverage than others; this may be detailed on the insurer’s Web site – called a drug formulary).
• Is there an annual cap on out-of-pocket expenses in a year?
• Is there an annual maximum benefit?
• How difficult is it to see a specialist or get a second opinion? Would you need a referral?
• Does the plan cover extras such as eye care or chiropractic visits?

Shop Online

Thanks to today’s online resources, you may comparison shop for health insurance all in one place. Conduct a search for “health insurance premium comparison” and then let one of the sites do all the work.

Once you answer a smattering of questions specific to you and your family’s circumstances, you may receive a comparison of benefits and price quotes which you may then adjust by tweaking benefits.

For healthy families, the lowest cost option may be a traditional plan with a high out-of-pocket deductible. Look for one with 100% coverage for annual check-ups, immunizations, and regular screenings. If you and your family do not get sick often, you may benefit from paying the much lower premium of a high-deductible plan. The higher the deductible you select, the lower the monthly premium.

Should you have a tough year and end up paying out-of-pocket till you meet your deductible, a plan with post-deductible services at 100% coverage is a great benefit. In this case, once you meet your deductible you may fill up on prescriptions, visit a dermatologist for mole checks or any other type of health care pursuits that you might normally forgo. You may even consider having a surgery you’ve been putting off. 

Health Savings Account (HSA)

One of the newest developments in recent years is the HSA—a tax-advantaged health savings account that may be opened in concert with a high-deductible health care plan. Basically, you pay your health care premiums out of your own pocket. But you may also contribute as much (or as little) as you want to your Health Savings Account, up to the maximum amount—which tends to increase every year and may be comparable to the amount of your deductible. 

All contributions to this account are deductible (even if you do not itemize deductions) when completing your federal income tax return.

You may pull from this account balance to pay for all medical expenses up to your deductible, and then pull from it for your percentage of costs beyond the deductible. You may use it to pay for co-pays, prescription drugs, and even some over-the-counter medications. The list of qualified expenses grows every year, and is available at the IRS Website. 

You may use money from the HSA to pay for braces, contacts, optometrist visits and other types of expenses that may not even be covered under your health care plan. All tax free. It’s almost like siphoning your hard-earned dollars through an account that allows you to pay for nearly all normal health care expenses—things you pay for out-of-pocket anyway—only now it’s tax free.

Better yet, this is not a use it or lose it Flexible Spending Account that many employers offer. If you don’t use all that you contribute to your HSA account in one year, it rolls over to the next year. And the next.

You may use HSA money to pay for COBRA or other health care insurance premiums if you’re unemployed. You may use it to pay for long-term care insurance premiums or long-term care expenses should you become disabled. Once you hit age 65, you may use HSA funds for anything.

Another beauty is that you do not have to contribute to the account, or may contribute whenever you want. For example, say you’ve scheduled a family visit to the dentist. Contribute money to your account in a few weeks earlier. You may then tap this tax-free money to pay for your check-ups.

To open an HSA account, you must meet the following criteria:

• Have coverage under an HSA-qualified “high deductible health plan” (HDHP)
• Have no other medical coverage (like an employer-sponsored HMO)
• Are not enrolled in Medicare
• Cannot be claimed as a dependent on someone else’s tax return

Under Price Employer Insurance?

If you do have employer-sponsored insurance but it’s exorbitantly expensive, consider shopping for an independent plan. If you stay reasonably healthy, you may be able save money on premiums by purchasing a high deductible plan and contribute to a health savings account to pay for your out-of-pocket expenses.

If you do decide to forgo employer-sponsored health care insurance, be sure to ask to be compensated since your employer is saving money by not subsidizing your plan. You can use this money to help offset your monthly premiums or deposit it into your health savings account.

Kara Stefan is a freelance financial writer and author of Head of Household: Money Management for Single Parents. You can find her at Linkedin or Kara Stefan Communications.