6 Tips for Buying Individual Health Insurance

6 Tips for Buying Individual Health Insurance

By: John Gotschall, Owner of Coaching Financial Concepts, Inc.

Are you one of the millions of Americans who have just been told that you won’t be able to keep the health insurance plan you like?  Are you working at a small business and the owner is contemplating dropping the group coverage to save on costs?  If you are, you are probably angry and confused, but eventually you will have to make a new choice for your health insurance.

It is estimated that over 15 million people will be losing their current coverage by the end of the year and will have to replace it with a plan that meets the new requirements.  Furthermore, it is estimated that somewhere between 50 and 90 million Americans will be replacing their plan within the next two years.  This is not a Halloween scare–just the facts.

As you have probably heard, all Americans are supposed to provide proof that they have health insurance coverage in 2014 that meets the minimum requirements or else they will pay a fine. This fine, or tax, will be monitored and collected by the IRS.

Switching insurance plans can be scary, but don’t panic.  The good thing about the new law is that the insurance companies cannot deny anyone coverage based on his or her health history and all pre-existing conditions must be covered.  However, these same provisions are the cause of the dramatically increased rates being charged for the new plans being offered as of January 1, 2014.

When purchasing a health insurance plan going forward, you will want to take the following six steps:

  1. Determine what your annual claims or medical expenses have been over the past year.  Add up your copays, deductible, and co-insurance expenses.  Will these expenses be about the same next year?  Is it likely your health will change in the next year?
  2. Make a list of the doctors and hospitals that you are currently using.  If you haven’t been to a doctor in a while, you should still determine who you might seek out for care.  What hospital(s) would you want to go to if you needed one?  Determine what insurance companies and PPO networks these providers will be accepting.
  3. Estimate your income for next year and see if you may qualify for a subsidy from the government to help pay your health insurance premium.  If your income exceeds $45,960 for a single person or $94,200 for a family of four, don’t bother going to the healthcare.gov website, as you won’t qualify for assistance.  If your income is below these thresholds, then you must enroll on the healthcare.gov  website to receive a subsidy starting in January 2014.
  4. Find an experienced insurance agent who you trust to help you.  An experienced agent will have worked with all of the available health insurance companies that market plans in your area.  Stay away from the new navigators as they are inexperienced and can’t advise you on selecting a plan.  Also, background checks have not been done on the navigators which means that you may want to think twice about entrusting them with your personal information.
  5. Have your insurance agent quote rates from several companies.  The essential health benefits and maximum out-of-pocket costs are all basically the same between companies.  The most an individual can spend for in-network expenses is $6,350 for an individual and $12,700 for a family.  The difference will be in the PPO network, the availability of an office visit copay, and the cost (or premium) for the different deductibles offered.  You definitely want to compare costs!

    Most of the plan options have really high deductibles to help keep the cost of insurance down.  If you think you will end up paying the maximum out-of-pocket limit of $6,350 for an individual, then choose the plan with the lowest premium that includes your doctors even if the deductible is quite high.  Think about it–a lower deductible just means that the insurance company will pay sooner so it doesn’t matter if you think you will hit the maximum anyway.

    If you won’t hit the limits next year, then you must calculate the difference in cost between a higher deductible plan against the lower deductible. Health insurance is based on “pay me now or pay me later” concept so you will have to determine if the savings can help pay for the difference in the higher deductible in the event you get sick or hurt.

  6. Based on your potential claims, you will want to choose the plan that makes the most financial sense.  Lower deductibles don’t necessarily mean the plan is better.  The point of health insurance is to pay for large claims.

Follow these steps, and while the process of buying health insurance may still be frustrating, it won’t be nearly as confusing.