A Comprehensive Guide to Individual Healthcare Coverage 

Overview

If you’re reading this guide, it’s because you’ve tried and struggled to find individual health insurance for you and your family. Hopefully you aren’t too frustrated, but we’re hoping this guide can help you and other people find health insurance with the coverage they need at the price they can afford. We know it’s tough out there—and with healthcare being mentioned daily, it’s even more intimidating, but getting affordable health insurance is very possible.

Introduction to Individual Health Insurance

Regardless of your age, lifestyle, or health, having health insurance coverage is essential. So essential, in fact, that the Affordable Care Act (aka Obamacare) requires American citizens and permanent residents to have “minimum essential coverage” or pay a tax penalty. If you needed a reason to purchase insurance, now you have one; if you don’t have health insurance as of January 1, 2014, you’ll be subject to a tax penalty.

Finding the coverage right for you

First, you’ll need to evaluate what level of coverage you need. Many health plans sneak in features to raise the premium price under the guise of Obamacare’s minimum essential coverage, essentially making you pay more for features and provisions you may not need. Before shopping for health insurance, ask yourself these questions:

1. How many people am I insuring? If it’s more than two, a family plan may be a bit easier. Larger families with multiple children will end up paying less by purchasing a family plan.
2. Are you healthy? Factors like age, where you live, and whether you smoke or not could impact the premiums you pay based on many different regulations and policies.
3. What’s my budget? It’s important to find a plan that provides the coverage you need, but high premiums and deductibles could hurt you in the long run. Keep in mind that depending on your age, you may be paying a bit extra.

These questions will help you search for something that matches your budget and the needs of your household that addresses your current healthcare needs. Once you’ve answered them, you’ll have to choose a plan that fits your needs.

Finding the right type of plan

Making sure you select a plan that meets your needs is important. If you have a particular doctor you want to continue seeing, you should make sure that doctor is in your plan’s network as your choices may be limited under certain plans. You should also pay very close attention to ALL your potential costs under the plan:  not just monthly premiums, but co-pays, deductibles and co-insurance. 

There are five types of health insurance, but the most common of the three are HMO, PPO, and indemnity. Below are the differences between HMO, PPO, and indemnity plans:

HMO

HMO (Health Maintenance Organization) plans offer a broad range of coverage at low costs; deductible costs for HMO plans, if any, are usually low, and all you’re liable for is a co-payment depending on the service. Almost all HMO plans require you to choose a primary care physician (also known as PCP) in their network, who will be your main source of care.

HMO plans are cost effective but also restrictive: coverage is usually all-inclusive, meaning the plan will cover the costs of all treatment or procedures provided by the physician in a visit, requiring you to only pay your co-payment. However, your coverage only goes as far as your plan’s network does, limiting your choice of doctors and hospitals. In addition, you can only visit a specialist if you receive a referral from your PCP.

This practice is quickly changing, though—Open Access HMO plans offer the same level of coverage but allow you to visit specialists without referrals from your primary care physician.

PPO

PPO (Preferred Provider Organization) plans are similar to HMOs in that they provide coverage through contracts made with healthcare networks of preferred providers. However, unlike an HMO plan, you don’t need to select a primary care physician and don’t need a referral to see a specialist for treatment.

PPO plans typically include an annual deductible and you’ll pay a co-payment every time you receive care. PPOs are a great option for those whose healthcare needs are consistent—if you need to receive health services from doctors or hospitals outside of your PPO plan’s network, you’ll pay a much higher amount for “out-of-network” care, and in some cases, you’ll need to pay the healthcare provider directly and file a claim with your health insurance provider for reimbursement.

HSA (Health Savings Accounts)

It’s easy to think of Health Savings Accounts as actual savings accounts like you’d open in a bank. Designed for individuals and families covered by high-deductible health plans (HDHPs), a Health Savings Account provides a large number of tax benefits to help offset the costs of the deductibles paid during the year, which is at least $1,200 for individuals and $2,400 for families.

Your contributions to your HSA are automatically deducted from your paychecks before they’re ever taxed. Your contributions are then used as a deduction on your tax returns at the end of the year, potentially reducing a substantial amount of your tax bill, and your employer can even contribute to your HSA on your behalf.

Health Savings Accounts are most beneficial to those approaching retirement, individuals and families with HDHPs, and those who work for employers that match HSA contributions.  HSAs are not recommended for someone not in those situations.

Indemnity

Indemnity plans are based off the original concept of health insurance that can be traced back to the insurance sold by hospitals as early as 1934. Similar to your car insurance, indemnity plans are mainly used on an as-needed basis, making this type of health insurance situational over a managed care plan.

Indemnity plans provide a great deal of flexibility.  They often have lower monthly premiums than traditional health insurance.   They can provide “first dollar” coverage for many medical expenses, though they might not cover the full cost (meaning you will have to make up any difference yourself).  The benefits of an indemnity plan may include not being restricted to a network, and not having to pay a deductible as you might with traditional health insurance.  As with any insurance policy, it’s imperative that you talk with a licensed insurance agent about any indemnity policy you are considering purchasing so you can fully understand that policy’s benefits and limitations.

What about the other stuff?

Vision, dental, and prescription drug coverage features are all extremely important components of adequate healthcare coverage, but how do you ensure you have them? While most individual and family HMO and PPO plans include vision, dental, and prescription drug coverage, insurance companies also sell these individually.

For the time being, it may be more beneficial to purchase a modular individual health insurance plan (i.e. one that contains the bare-minimum amount of features you need) and add individual services. The benefit to this is that you don’t have to pay higher premiums for vision insurance if you don’t plan on using it, making your a-la carte health insurance cheaper.

Healthcare Reform and Your Individual Health Insurance Plan

Now that you’ve grasped the basics of individual health insurance, it’s important that you learn how our country’s dynamic and controversial healthcare system affects your ability to get affordable health insurance. You should know what elements are working for you and which aspects of healthcare reform work against you; these tools and hurdles can help you in your search for your affordable healthcare plan if you strategize and use patience. We know you can do it.

The silver linings of the Affordable Care Act

The Affordable Care Act (aka Obamacare) does make drastic changes to our nation’s healthcare system, but that doesn’t mean all of them are controversial. Although some of these changes only benefit certain groups of Americans, these general improvements to our nation’s healthcare system could prove to be valuable in your search for affordable health insurance:

• People, especially children, can’t be denied coverage because of a pre-existing condition. They also can’t be charged more for it, either. Once you have insurance, they also won’t be able to deny claims for treatments related to your condition.
• Young adults (i.e. college students) can remain under their parent’s health insurance plans until they turn 26 years old. This provision is fairly flexible too: your young adult children can stay on your plan even if they’re married, live elsewhere, or financially independent.
• Several improvements made to the Medicare program helped its beneficiaries, the bulk of which came in the form of changes to the way they pay for their prescription drugs.
• Insurance companies are now limited in what they can do to your plan while you’re covered. Restrictions like Obamacare’s 80/20 rule, the elimination of lifetime coverage limits, and arbitrary policy cancellations ensure that America’s insured are treated fairly.

The not-so-pretty features of the Affordable Care Act

For all of the great changes that the Affordable Care Act provides, it seems to also offer some controversial changes that have been the subject of debate since the law’s passage in 2010. These laws still may be a silver lining for some, but others perceive them as government overreach. Either way, here are some of the provisions of the Affordable Care Act that may affect your search for affordable healthcare:

• The individual mandate requires most American citizens and permanent residents to have health insurance coverage that meets a minimum essential coverage requirement. Those that don’t comply will see a tax penalty that increases as the years pass by. In some situations, you may be exempt from the individual mandate.
• New benefit requirements, the requirement that insurance companies take applicants with pre-existing conditions, and new taxes and fees will increase premiums for many consumers.
• The benefits provided to the elderly and impoverished by the Affordable Care Act are not solely funded by the government; the young and healthy are essentially subsidizing this group of Americans, increasing premiums for pretty much all insured Americans that aren’t on a federally-funded or subsidized health insurance plan.
• A rush of newly insured Americans will overwhelm a healthcare system with an already critical physician shortage, leading to long wait times and lower quality of care.  This includes new enrollees in expanded Medicaid programs.  Many doctors already refuse to see people covered by Medicaid due to low reimbursement rates. 
• For the blessings Medicare beneficiaries received in the law, there are some downfalls: the Affordable Care Act drastically reduces payments made to healthcare providers, which is prompting small practices across the country to stop accepting Medicare patients.

It’s your turn.

Now that you have the information and tools to help you, finding affordable individual health insurance that meets your budget and needs shouldn’t be that difficult. The benefits and challenges presented by the Affordable Care Act will make your quest for affordable health insurance interesting, but you should know that you’re not alone: if you run into a roadblock, we’re always here to help.

A quick glossary

Some of the terms mentioned in this buyer’s guide may be unfamiliar, especially if you’ve never had health insurance before. These terms are simple and will become part of your everyday vocabulary when dealing with your health insurance.

Premium:  The amount you pay (usually on a monthly basis) to a health insurance company for coverage.  You must pay your premiums to keep your policy in force.   Example:  Sally’s monthly premium for her health insurance policy is $200, she makes this payment on the first of every month to her health insurer.

Deductible:  The amount you must pay for covered health care services before your health insurance plan begins to pay.  Note that some services – like preventive care – might be covered even before your deductible is paid.  Example:  Jennifer has a policy with a $1000 deductible.  She fell and broke her hip, and had to spend several days at the hospital.  She was required to pay her $1000 deductible, and her insurance company paid all her hospital bills after that.

Co-Pays:  A fixed amount for a service covered under your policy that you are required to pay yourself when you visit your doctor, go to the hospital, or fill a prescription.  Usually the co-pay must be paid when you receive the service.  Example:  every time Bill goes to his doctor, he must make a co-payment of $50.

Co-Insurance:  A percentage of the costs of a covered service that you are required to pay yourself, with the insurer paying the rest.  You must also pay any deductible owed.  Example:  Joe’s policy has 20% co-insurance.  He has already paid his annual deductible.  His visit to a specialist cost $100.  His co-insurance payment for that visit is $20, and the health insurance company will pay the rest of the allowed amount.