Pointers on Individual Health Insurance

How does individual health insurance differ from group insurance?
Individual health insurance is coverage that a person buys personally compared to Group Health Insurance through an employer. It can be sold to an individual, to a parent and dependent children, or to a family.

The majority of Americans get their health insurance coverage through an employer or through a government program. A growing share of the population purchases private health coverage on an individual basis. Each state independently regulates the type of coverage and how individual policies may be sold.

Where can I buy individual health insurance coverage?
In almost every state, individual health insurance coverage can be purchased through licensed health insurance sales reps known as agents or brokers. Independent agents and brokers sell insurance plans from many companies, and they can help you find the coverage that best suits your individual needs.

You should know that the insurance companies pay agents and brokers a commission for their work. As a result, their services are available to you at no cost. Agents and brokers also provide service on the policies they have sold. They can also help you process claims or with anything else you need regarding your policy.

Brokers are often a better resource than the insurance company’s agent because broker’s have access to many different insurance plans. They are likely to help you find the right plan from the right company for your needs. An agent only has access to their company’s plans.

A key point is that individual health insurance is both costly and complex. You no longer have the benefits of a trained Human Resources organization. A broker can often help you understand how to meet your needs most cost effectively.

Another key point is that on line insurance services price their insurance at "preferred rates." As a buyer, you may then be surprised to find that the actual cost you pay after the insurance company has reviewed your medical background can be significantly higher.

How is individual insurance different from group insurance?
Individual health insurance is very different from the group health insurance you got through an employer. Benefits are generally less extensive than what most people would receive through coverage they have through work.

Cost is usually the key factor for individual health insurance consumers. Deductibles, co-insurance and cost-sharing are also generally higher. Keep in mind, an employer views the benefit program they offer as an incentive used to promote long term employee loyalty. They are willing to pay quite a bit to retain key employees. When you purchase insurance independently, you will see the true cost.

Applicants for individual insurance will need to complete a brief medical questionnaire when applying for benefits. Unlike a group insurance policy, in most states a company can decide not to cover people with very serious medical conditions such as diabetes, HIV or cancer. There are alternatives available for persons with significant pre-existing conditions. These are “guaranteed issue” plans.

How are premium rates determined?
When determining rates, insurance companies use the medical information you provide on their applications. Additionally, they may require information from an applicant's physician or contact the applicant directly. It is sad but true that the doctor’s notes can often be a determining factor.

If the insurance company cannot accurately determine the risk, it will underwrite more conservatively. As an example: A person has a history of high cholesterol but is not taking medication. The circumstances may be that the individual is actually being monitored by the doctor as a means to determine the correct course of treatment. Regardless, the insurance company will likely determine that the cholesterol problem is not controlled and that may result in a decline.

Once the company has determined your health status, you will be assigned a rate class by the company. This will put you into a pool of other insured individuals with similar health status. Your premium will be the rate charged to that entire class of customers. Subsequent annual renewal premium rates will be determined not by your individual claims, but instead by the claims experience of the entire rating class pool.

While all of this may seem negative, the reality is that most people are generally healthy and there are few issues with approval. Furthermore, you can choose more carefully if you are aware of your circumstances. Most important: ask lots of questions when you are applying for insurance.

How are pre-existing medical conditions covered?
In almost every state an insurance company can choose not to offer coverage to people with serious medical conditions. Some individuals decide to not purchase health insurance coverage until they have a known serious medical problem.

Insurance companies look back at pre-existing conditions and may choose not to cover certain conditions for a specified period of time. This is a pre-existing condition, waiting period. The amount of time an insurance company can look back at your medical history, and the length of time this period can last, vary on a state-by-state basis.

In some states, you can receive credit against a pre-existing condition waiting period if you have had prior health insurance coverage within a specified number of days. The amount of the credit against the waiting period is generally proportional to the length of the prior coverage.

Can I still buy individual insurance if I have a very serious pre-existing medical condition?
In most states you can be turned down for individual coverage if you have a very serious medical condition for example diabetes, HIV or cancer.

Fortunately, most states have developed some way to provide uninsurable people with access to individual health insurance coverage. Many states provide coverage to medically uninsurable people through high-risk pools. Some states use other means of providing uninsurable people with access to individual coverage. They may require that all individual health insurance companies issue individual policies regardless of health status, or offer coverage through a designated health insurance company of last resort, etc. A few states still have no means of providing individual health insurance access to people with catastrophic medical conditions. To find out what your state's options are for medically uninsurable individuals, check out the state department of insurance web site.

Keep in mind, there are Guaranteed Issue plans that will accept almost any medical condition. There rates are a little higher, their coverage is not going to be comprehensive, but some insurance is always better than none.