Individual health insurance is exactly what it sounds like - coverage you purchase on your own, directly from an insurance company or insurance agent - as opposed to group insurance, which you typically receive through your employer. If you are 65 or older, you can also purchase individual insurance from private companies to help pay for some of the costs Medicare does not cover. These plans are usually called Medicare Supplement plans and you can read about those in our Medicare Ready section.
There are many reasons someone under the age of 65 might need to purchase their own health insurance. Your employer might not provide health coverage, or you might be an early retiree, self-employed or transitioning from COBRA. Major medical health insurance is available to help protect you and your family against health care costs and get access to care. You pay the entire premium each month; no employer makes any contributions. In addition, coverage is not guaranteed and the limitations around eligibility may vary.
You have a number of options when shopping for individual health insurance, including:
A Fee-for-Service Insurance policy (also called indemnity insurance) is a traditional kind of health insurance. It partially pays for each medical service you get, such as doctor visits or hospital stays. You're responsible for the remainder of the cost. The insurer calculates the amount they cover in one of two ways - by covering a percentage of the approved amount for the service (insurers maintain a list of what they think each service should cost, which can differ from what they actually cost), or a fixed amount. In the case of a fixed amount (also known as a fixed cash benefit), the insurer covers a fixed amount per service - $50 for a doctor visit, for example- even if the medical service costs you more.
One advantage of fee-for-service plans is that you can go to any doctor or hospital you choose. However, you usually pay a higher monthly cost for your medical care than you would as part of a managed care plan.
It's common to receive health insurance through a managed care plan, such as a health maintenance organization (HMO) or preferred provider organization (PPO).
Some states require managed care plans to have an "open enrollment" period each year. Open enrollment is commonly a one-month period during which managed care plans must let people join, even if they have an ongoing, serious medical problem. This is a good option if you have not been able to get health insurance because of a pre-existing condition - you can sign up for a managed care plan during an open enrollment period without needing medical exams for approval.
Many professional, community and religious organizations offer their members health insurance coverage at group rates. If you are a member of any trade or professional association, ask if it offers health insurance coverage. This option may offer lower premiums than plans you purchase directly from a private insurer, but check the coverage and other out-of-pocket costs carefully to truly compare.
In some states, high-risk pools are a source of health insurance for people who have not been able to get health insurance because of a pre-existing condition. Generally speaking, risk pools are state-sponsored, nonprofit associations. A risk pool is a temporary stopping point for individuals who are denied health coverage - or for individuals who need to fill a gap in insurance coverage. They are usually considered a last resort because premiums charged to policyholders are generally higher than rates for comparable policies in the marketplace. (For more information on any of these terms, please visit the Heath Insurance Terms Glossary link on this page.)
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When purchasing something as important as health insurance, it's a good idea to create a list of questions to ask about each of the choices available to you. Here are a few things to consider:
This is one of the first questions many people ask when looking at health plan options. The answer to the question depends on which type of individual health insurance you choose. If you select a Health Maintenance Organization (HMO), you are required to receive care from within the plan's network, so check to see if your doctor is in that plan's network. If your doctor is a specialist, most HMO plans require that you first see a primary care physician for a referral.
Like HMOs, Preferred Provider Organization (PPO) plans have provider networks, but unlike HMOs, PPOs also let you visit any doctor or hospital you choose, without a referral. Keep in mind that you'll pay less out of your own pocket if you see doctors and hospitals in the insurer's participating network, but if any of your doctors are outside the network you can still see them under a PPO plan. It's helpful to choose an insurer with a large, nationwide network of doctors and hospitals, since it increases the chances that your doctor is in the network.
Many insurance companies offer a choice of major medical plans, some with prescription coverage and some without. Comprehensive individual health insurance usually covers your prescriptions, after a deductible. Be sure to check how a plan covers preferred, non-preferred, and generic prescription drugs, because plan details may differ. If you have a regular list of prescriptions, you may want to do some research into the plan's formulary. A formulary is a list of drugs covered by the plan, and should tell you what your cost for each will be.
Some individual health insurance allows you to add a dependent spouse and children or grandchildren to your policy - even if no other family member enrolls. Unlike employer-based plans, individual insurance requires each family member to go through separate "medical underwriting," which evaluates the costs of insuring the added members and determines eligibility for coverage. Also, some plans may offer "Child Only" coverage. Be sure to ask about eligibility requirements, which can include criteria such as age, marital status, adoption status, legal guardianship or family relationship.
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Before you purchase anything, it's a good idea to shop around and compare individual health insurance policies and plans. A first step could be to decide how much you can afford to pay. With a figure in mind, you can look for health insurance that will give you the best health coverage for you and your family at that price.
There are a few ways to proceed. Before ultimately selecting an individual health insurance plan, it's in your best interest to compare plans from several health insurance carriers to be sure that you are selecting the policy that will best fit your needs and budget. Web-based tools and applications are an easy way to determine coverage and cost, and they eliminate the need to call around to multiple companies and agents.
However, if you have a lot of questions or prefer to speak to someone about your choices, a licensed agent can help you sort out all the details of a health insurance plan - and help you with the application process. It's important to keep in mind that it's an agent's job to try and sell you a policy. That doesn't necessarily mean that they don't have your best interest in mind, but it does mean that you should be sure to shop around and speak with multiple agents before making a decision.
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Individual health insurance can be expensive. One reason for this is that those who buy their own coverage can't negotiate lower rates like employers or other large group plans. When researching individual health insurance, you should be realistic about the costs balanced against the importance of good coverage. Think of health insurance as an investment in your health and your family's health.
Premium rates for individual policies vary widely, depending on state rules, the type of coverage included, and the applicant's age and health. Unlike coverage provided through an employer, in which all applicants are accepted, insurers can reject applicants for individual coverage in most states if they have medical problems (a.k.a. a pre-existing health condition).
When you apply, an insurance company will look at your health history, the number of medications you take, and other health aspects to determine your eligibility for coverage. If you are denied coverage, there are still options for you to get insurance through state-regulated high-risk pools. And sites like the Foundation for Health Coverage Education can help you assess all your options.
One way to keep premiums manageable is to increase your deductible. Another is to look for a plan that just covers the basics - medical, hospital, and prescription drugs. Some benefits, such as coverage for dental, vision, and hearing care, may be more important to you than others, and you'll want to keep them even if it means a higher premium. In many cases, you can pick and choose.
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Health Insurance Agents
If you are having a hard time deciding which insurance plan is best for you, consider speaking with a health insurance agent. An independent agent sells many different kinds of health insurance, usually from multiple companies.
Be sure you understand how the agent is paid - find out who pays the agent the commission for the sale - you or the insurance company. It may affect the plan that the agent recommends. Keep in mind that agent-purchased coverage might cost more. Also, not all insurance products are available through an agent.
There are types of insurance policies that should not be mistaken for comprehensive health insurance. Specific Disease policies, such as cancer policies, pay only for care of a specific disease. Hospital Indemnity policies pay you a set amount of money for each day you are in the hospital. These policies may sound good but do not really cover all your health care costs. Research these kinds of plans very carefully to determine exactly what coverage you'll be getting.
Unlike an employer's plan, you are not guaranteed coverage with individual health insurance. Based on your current and past health, it's possible to be declined, or offered coverage at a higher premium.
On your application, you'll need to submit medical information that passes through the insurer's "medical underwriting" process, which evaluates the costs of insuring you and determines if you're eligible for coverage. You might be accepted, denied or accepted with a "pre-existing condition" waiting period. A pre-existing condition waiting period is the amount of time a new plan requires before it starts paying benefits related to a specific illness or condition. You may receive coverage at a higher-than-quoted rate due to pre-existing medical conditions. If you are declined coverage, you may be federally eligible under the Health Insurance Portability and Accountability Act (HIPAA) for a special plan that guarantees you will be accepted under your state's laws and regulations.
For most people, group health insurance is a better choice than individual health insurance. Group insurance usually costs less and offers more benefits. However, some people can't get group health insurance because they are self-employed, work for a company that doesn't offer group insurance, have run out of COBRA benefits, or for some other reason.
Many insurance companies offer health insurance plans to individuals. However, if you're over 50 years old, there can be challenges to getting coverage:
While it's true that group health insurance usually offers better value than individual health insurance - it's still far better than going uninsured. Individual policies accomplish the important goal of protecting you and your family against the uncertainty of big medical bills.
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