There are several reasons why a first-time buyer might choose to purchase individual health insurance.
- They’re not covered by an employer-sponsored insurance plan.
- They’ve aged out of a parent’s or guardian’s health coverage.
- They experienced a major life change like getting married or having a baby.
But no matter the reason, the decision to buy individual health insurance comes with an array of potentially overwhelming choices. In this post, we’ll discuss the process of choosing a plan and cover a few topics that every first-time buyer should know.
HOW INDIVIDUAL HEALTH INSURANCE WORKS
Individual health insurance is medical coverage that you purchase on your own. It’s not sponsored through an employer or government program. You can either buy these plans through state or federal health insurance marketplaces or directly from insurance companies.
Individuals pay a monthly premium to the insurance company, which then covers some or all of the costs associated with medical care—depending on the plan’s terms and conditions. Premiums may vary due to the individual’s age, health status, and geographic location. Some may also require individuals to pay a deductible, which is partial out-of-pocket costs owed, by you, before the insurance coverage handles the remainder.
ARE YOU REQUIRED TO HAVE INDIVIDUAL HEALTH INSURANCE?
At the federal level, no. Although the Affordable Care Act (ACA) initially required most Americans to have health insurance or face a tax penalty, that mandate was eliminated in 2019. That said, some states still insist their residents have coverage.
But keep in mind, even if you’re not obligated to carry individual health insurance, it’s a good way to help protect yourself and your family from unexpected (and unwanted) medical expenses.
STATE VS. FEDERAL HEALTH INSURANCE (THE MARKETPLACE)
The ACA established the Health Insurance Marketplace, also known as the health insurance exchange, to help individuals and small businesses claim coverage that’s right for them. Essentially, the Marketplace encompasses an online aggregate portal of available health plans offered by private insurance companies.
In addition, the Marketplace parcels information about financial assistance programs—including premium tax credits and cost-sharing reductions—to aid individuals in subsidizing their coverage. The Marketplace is administered by either the state or the federal government, and at present, 18 states have their own exchanges.
DIFFERENT INDIVIDUAL HEALTH PLANS AND THEIR BENEFITS
For first-time buyers choosing an individual health insurance plan, it’s easy to get lost in a sea of acronyms and terminology. But the most common types of plans fall into four categories:
Health Maintenance Organization (HMO)
An HMO plan generally requires you to select a primary care physician, who then coordinates your care, and refers you to a specialist as needed. HMOs often have lower out-of-pocket costs, but limited provider networks.
Preferred Provider Organization (PPO)
A PPO plan allows you to see any in-network provider without a referral. Or any out-of-network providers, while shouldering an additional cost. PPOs often have higher premiums but more extensive provider networks.
Point of Service (POS)
A POS plan is a mix of HMO and PPO plans, where you have a primary care physician who coordinates your care, but you can also see out-of-network providers for a higher cost.
High Deductible Health Plan (HDHP)
As the name suggests, an HDHP has a high deductible, which means you pay more out-of-pocket, upfront, before your insurance covers the rest of your medical expenses. HDHPs often have lower monthly premiums and are paired with a Health Savings Account (HSA), which allows you to save pre-tax money on expenses incurred.
When choosing a plan, it’s important to consider the provider network. Each plan has a list of providers (i.e. affiliate doctors, practitioners, and specialists) that are “in-network,” which means they’ve contracted with that insurance company to provide services at a discounted rate. Selecting a provider that’s “out-of-network” can result in higher out-of-pocket costs—or even outright denial of coverage.
That’s why you should always check before choosing a plan to ensure that your preferred doctors and hospitals are easily accessible.
Again, out-of-pocket costs are the expenses you’re responsible for after your insurance company has paid its portion. These charges can include things like deductibles, copayments, and coinsurance. Generally, plans with lower monthly premiums will have higher out-of-pocket costs, while plans with higher premiums will see lower costs.
These dollars add up in a hurry, so it’s important to pick a plan with a price structure you can afford.
MAKING THE RIGHT CHOICE
Choosing an individual health insurance plan doesn’t have to be all-consuming. But, understanding the basics can go a long way toward making a sound decision.
At Health & Benefits Partners, we’re here to guide you through the vast opportunities at your fingertips—options that fit your specific lifestyle and needs. So, if you’d like help choosing coverage that’s right for you, reach out to our experienced and friendly team.
And if you’re a first-time buyer, don’t make an educated guess. Or worse, leave your health to chance. We’re independent brokers, after all, working with major carriers over the last 20 years. Looking after your wellbeing… it’s who we are and what we do.