How to Buy Personal Health Insurance

Health Insurance Doctors

With more people being self-employed or working for employers who don’t offer health insurance coverage, the ability to buy personal health insurance is more important than ever.

Having the right health insurance coverage — at the best possible price — is one of the most important financial decisions we can make. In most households, health insurance is second only to the house payment as the largest expense in the budget.

It’s tough enough to get the right balance when you participate in an employer health plan, but getting the right personal health insurance is something close to navigating through a minefield.

Personal vs. Group Health Insurance

If you’ve been covered by an employer group plan up to this point you may find looking for a personal plan to be more than a little confusing.

For one thing, with group plans, your human resources department or an independent benefits company (managing the plan for your employer) handles all the negotiations with the health insurance carrier. With personal health insurance, you’ll have to do that yourself.

For another, group plans offer limited options. You’re typically given only two or three coverage options, for example, the choice between a PPO (preferred provider option) or an HMO (health maintenance organization). If you’re shopping for a personal plan, the options are almost unlimited!

There are usually differences in benefits as well. While a group plan will generally pay claims for pre-existing conditions almost immediately, a personal plan may contain a waiting period before those claims will be paid. A group plan may also cover certain events — such as maternity benefits — that are typically excluded under personal health insurance plans.

In addition, you will have to qualify for a personal plan based on medical history—in a group plan, you’re accepted into the plan based on your employment with your company. Group plans also charge the same premiums for each employee (based on family status); with a personal plan, your premiums will consider your health conditions. Good health will result in lower premiums, less than good health will reflect higher premiums.

Deductibles, Co-Payments, and Co-Insurance

Health insurance plans contain “risk sharing” provisions that keep premiums lower than they would be if they didn’t exist. The risk sharing vehicles — deductibles, co-payments and co-insurance — center on “first dollar expenses”.

Deductibles

Every health insurance plan has a provision that requires the insured to pay a certain fixed amount of expenses incurred before the insurance company benefits will apply. This provision prevents the insurance company from having to pay for minor medical charges, which are also far more common than the big medical disasters we’re most concerned with. Deductibles can range between $500 and $10,000 or more. Plans usually contain an individual deductible and a family deductible that’s typically two or three times the amount of the individual deductible.

Co-payments

Most people understand these since they’re very straightforward. You pay a certain flat amount of a medical cost when incurred. It may take the form of a $40 payment for doctor visits, $20 for prescriptions, or $100 for an emergency room visit.

Co-insurance

This is the most confusing of all risk sharing provisions even though it’s included in nearly every health insurance plan, whether it’s a group or personal plan. Simply put, you will pay a certain percentage of your health care costs — typically 20% to 30% – once the charges exceed your deductible. There’s usually a out-of-pocket limit beyond which the insurance company will cover 100% of the expenses, say $2,000 or $3,000. As an example, let’s say a plan has a $1,000 deductible, a 20% co-insurance provision, and a $3,000 out of pocket maximum. On a $20,000 medical claim the coverage would look like this:

First $1,000 — paid by you as part of the deductible.

Next $10,000 – $2,000 paid by you, $8,000 paid by the insurance company; under coinsurance, you pay 20% up to $2,000 ($3,000 less the $1,000 deductible) and the insurance company pays the rest.

Next $9,000 — 100% paid by insurance

The split works such that out of $20,000, you pay $3,000 and your insurance company pays $17,000.

As a rule, the higher your deductibles, co-payments and co-insurance are, the lower your monthly premiums will be. Just make sure that risk sharing provisions aren’t set so high that you might become dangerously exposed in the event of a serious medical event.

Shopping for a Plan

Thanks to the internet, shopping for personal health insurance has never been easier. Every insurance company in operation has websites that can not only explain their plan offerings, but many also offer a quote option that allows you to compare plans specific to your circumstances. You can check out health insurance rates right here on ChristianPF. Also be sure to check out other insurance company sites to get an idea as to what they have and what it will cost.

A note of caution here . . . there are no small number of health insurance comparison websites, and they’re best avoided. When you go to these sites, you’ll be asked to provide your contact information and even some personal information that you shouldn’t be giving to unfamiliar web sites. Just as bad, you won’t get the information you’re hoping to find, but rather a flood of phone calls and emails from insurance brokers who paid for leads generated by the sites. Be forewarned!

Use an Independent Health Insurance Broker

You can get information and price quotes from insurance carrier websites, but you’ll almost certainly be better off working with an independent insurance broker. There are several reasons for this recommendation:

  1. An independent broker works with several insurance companies and can set you up with a plan that best suits your needs
  2. Most of us don’t know enough about health insurance to get the right plan for ourselves
  3. Since rising premiums will force periodic changes in health insurance carriers, you’ll want to work with an independent agent who knows your needs and can set you up with appropriate insurance companies when the time comes – and it will!
  4. There are too many changes with health insurance that people with day jobs can’t possibly stay on top of
  5. Insurance companies pay independent brokers a commission for their services — you will not pay extra for their services

You could get your own personal health insurance, but if you use an independent insurance broker, you’ll probably get a better deal and one that you won’t have to pay extra for.

You also may want to consider a Christian health insurance alternative like Medishare or Samaritan Ministries.

If you need more direction on what types of insurance might be best for your situation, try contacting a financial coach at ChristianPF Coaching. They’ll even help you find room in your budget so that you can afford insurance! Just ask!

Have you had experience buying personal health insurance? What would you recommend?











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12 Comments
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  1. Kevin, I remember being so confused, years ago, about the difference between co-pay, co-insurance, and deductibles. It became a challenge to figure out what health insurance plan was right for our family because, with so many differences in co-pays, co-insurance, and deductibles, it was hard to compare apples to apples. Once I finally figured out how to determine the maximum out-of-pocket cost for each plan, it became easier. We’ve had a high-deductible HSA for six or seven years now and love it.

    • Hi Rich–The high deductible with an HSA is a great way to do it, especially if you’re healthy. You save on the premiums with the high deductibles and cover the rest with the HSA. And if you don’t spend the HSA you can roll it over like an IRA. It’s a complete win-win.

      • Wouldn’t it have been nice if Congress had provided vouchers so that uninsured people could open their own HSA which they can control, instead of creating another massive bureaucracy that is now estimated to cost at least twice what it was originally pegged at?

        • It reminds me of a saying I heard many years ago, “A giraffe is a horse designed by Congress”. They might mean well, but everything seems to go haywire with group decisions. Simple solutions are rejected in favor of concensus. It’s not even new to our time and our government.

  2. One option to get group plans and rates is to join an organization that can offer such thru their group – such as the Farm Bureau. For a small annual dues fee, you can get better coverage than what might be available independently. But remember, plans change from state to state, so do not assume anything about your plan or rates – do your research.

    Also, at the time of this writing, many insurance companies are charging high premiums for those clients they *do* accept. With the current political climate and health legislation on the books they are anticipating high expenses and covering their backsides.

    • Hi Edward–What you’re saying is completely true. With the full implementation of healthcare reform taking place on 1/1/2014 we’re in a transition phase right how. This is a tough time to by health insurance.

  3. Kevin –

    Thanks for your post. As Rich said, buying health insurance on your own can be extremely confusing the first go around.

    I was wondering if you had any thoughts on two items:
    1. How does Obama Care (at least as it stands now) change shopping for individual health insurance?
    2. What type of coverage would you recommend for people? Put another way, what are the top 3 questions everyone should ask themselves to land on coverage options? For example, Rich has a high deductible plan but that may not be the best policy for everyone.

    Thanks for your thoughts!

    JP

    • Hi JP–On your first question, I think we’ll have to wait and see how Obamacare plays out. I expect major revisions once it’s fully implemented, and we can’t even begin to guess what those will look like.

      On your second question, there are probably 20-30 questions that need to be asked! Health insurance is that complicated, and that’s why I recommend an independent insurance broker. Most of us regular folks are completely unqualified to by health insurance on our own.

      Some questions I can think of off the top of my head might be 1) how stable is the company, 2) what are the restrictions on pre-existing conditions, 3) what is my Max out of pocket (rather than co-pays and deductibles), 4) are there any significant deductions…we could go on and on!

  4. Health insurance is a confusing minefield – great job in bringing some clarity. But everything may be changing in 2014 when/if the new Affordable Care Act becomes active. Any choice people make for 2013 will last for only one year.

    One aspect of the new law may drive independent agents out of the business. Medical Loss Ratios as of today count agent commissions as part of the overhead. If that continues, don’t bother calling an independent agent – there won’t be any left. Agent lobbyists are trying to change this rule, and are making headway. Time will tell how this plays out.

    • Hi Kevin–You’re posing excellent questions. Based on my research, pending healthcare reform will be a real gamechanger. The bill is so complex and far reaching that I don’t believe there’s any way we can predict how it will play out from where we are today. I’m still completely mystified as to how it will all be funded.

      One clue we do have however is Massachusetts. Since the reform bill is largely based on the Mass. model, we can fully expect prices to rise substantially. Mass. has the highest healh insurance premiums in the country–twice the national average.

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