Individual Health Insurance May Save You Money

How to Find an Individual Health Insurance Plan

Private health insurance may save you money!. tazytaz/iStockphoto

For some consumers, buying individual health insurance is the only health coverage option. However, even if you have health insurance from your employer, an individual/family health insurance policy may still be an option to save money. With health insurance premiums increasing every year and employers passing more of the costs onto their employees, your company's health insurance may not be the best deal.

According to the Kaiser Family Foundation, in 2016, the average American worker with employer-sponsored health insurance contributed $1,129 for a single employee health plan and $5,277 for a family health plan. Since this is an average, some employees may be paying much more (employers paid the bulk of the total premiums, which averaged $6,435 for single employees and $18,142 for family coverage).

Shop Online for a Better Health Insurance Premium

Shop around online and see if you can find a private insurance policy that provides you with the coverage you need but is less expensive than the premium you pay at work.

A good place to start is HealthCare.gov. This is the health insurance exchange created by the The Patient Protection and Affordable Care Act, and is a one-stop shop for private individual market health insurance plans (note that the exchange itself is run by the government, but the health plans for sale in the exchange are all private, from the health insurance companies with which you're already familiar).

People in 39 states use HealthCare.gov to enroll in individual market plans. The other 11 states and the District of Columbia have state-run exchanges, and you'll be directed to their sites from HealthCare.gov when you select your state.

Another place to seek information for health plan options in your area is ehealthinsurance.

This online company provides information and access to 1000s of health insurance plans and is licensed in all 50 states and the District of Columbia. Even if you don't buy insurance through them, ehealthinsurance is a good place to search for a health plan and get a sense of how many plans are available in your state and how much they cost. ehealthinsurance can show you plans that are available off-exchange, as well as exchange options.

Note that all individual market plans, regardless of whether they're sold in the exchange or not, have an annual open enrollment window. If you're shopping outside of open enrollment, you'll need to have a qualifying event in order to enroll.

How Buying an Individual/Family Plan May Help

Among workers at small companies (up to 199 employees) who have family health insurance coverage, 34 percent pay more than half of their total family health insurance premium as a payroll deduction (with the employer paying the remainder).

Since the average premium for a family is more than $18,000, many employees are paying more than $9,000 per year to cover themselves and their families. Some of these employees may do better buying their own insurance. For example:

Doug Jones works for a small company that offers a PPO health insurance plan (with a yearly deductible of $1500) for employees and their family. Because of the recent down turn in the economy, Doug's company increased his share of the family monthly premium to 60%, which costs Doug almost $950 each month.

Doug's wife works part time as a librarian and has no health insurance benefit. The Joneses have two children ages 7 and 10. All four family members are in good health and have a healthy lifestyle.

In most states, prior to 2014, Doug might have found the medically underwritten coverage in the individual health insurance market to be much less expensive than his job-based plan. But the ACA banned health insurance companies from considering applicants' medical history when setting prices and determining eligibility for coverage.

As a result, the difference in price between individual/family plans and employer-sponsored plans has narrowed. Individual market plans are more expensive than they used to be, although for many enrollees, premium subsidies (premium tax credits) offset much of the premium, making coverage affordable.

Unfortunately for Doug, he and his family almost certainly aren't eligible for premium subsidies. As long as Doug's own coverage (without his family) is considered affordable and provides minimum value, he and his family are ineligible for subsidies. This is known as the family glitch.

However, they might still be able to find a less expensive plan in the individual/family market, even paying full price for the premiums. It would almost certainly have a higher deductible and out-of-pocket exposure than the plan Doug's employer offers, but that might be a trade-off that the family considers worthwhile.

Understand Your Options; Read the Fine Print

If you're eligible to enroll in an individua/family plan (either during open enrollment or as a result of a qualifying event) and you want to make the switch, make sure that you fully understand the benefits and limitations of the individual plan compared to your employer-based plan.

How do the benefits differ? What would you owe in out-of-pocket costs if you were to be injured or get seriously ill? How does that compare with your out-of-pocket exposure on the employer-sponsored plan? Are your doctors in the network of the individual plan? You'll want to carefully consider all of these things before switching, and keep in mind that you won't be able to rejoin your employer's plan until the next open enrollment window offered by your employer.

If you apply for individual health insurance, do not cancel any health insurance coverage you currently have until you receive an approval letter and insurance policy, or contract from the health plan you selected.

Before you make any commitment, carefully review the new insurance policy.

Updated by Louise Norris.

Sources:

Kaiser Family Foundation, Employer Health Benefits, 2016 Summary of Findings.

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