Guide To Individual Health Insurance Plans
What is individual health insurance?
Individual health insurance is coverage that a person buys independently. It can be sold to a single 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, but five percent of the population purchases private health coverage on an individual basis. Each state separately regulates how individual policies may be marketed and sold.
How can I buy individual health insurance coverage?
In almost every state, individual health insurance plans can be purchased through licensed health insurance salespeople 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.
Agents and brokers also provide service on the policies they have sold, and can help you process claims or with anything else you need regarding your policy. The insurance companies for which agents and brokers sell coverage pay them a commission for their work, so you will not be charged a direct fee if you want to use the services of an agent or broker. You can find agents and brokers who sell individual coverage via the Internet, or you may prefer to consult with one in person.
How is individual insurance different from group insurance?
Individual health insurance plans are very different than group health insurance, which is the type of insurance that is offered through an employer. Since laws mandating what types of services must be included in individual policies are often different than those dictating what must be included in group policies, benefits are generally less extensive than what most people would receive through coverage they have through work. Individual consumers may be surprised to learn that some benefits that may be considered “standard’ in a group policy, like maternity coverage or substance-abuse treatment, may not be included in an individual plan. Sometimes Individual Health Insurance Plans consumers have the option to pay extra for coverage of additional services like maternity coverage. This extra coverage is referred to as an optional rider.
Cost is often the primary factor for individual health insurance consumers, which is another reason why the benefits included in individual policies are often simpler. In addition, deductibles (the amount you have to pay before insurance benefits begin) and cost-sharing (the fees you pay directly to medical providers at the time of service) are also generally higher.
Individual health insurance companies are much more limited than group insurance companies in their ability to spread risk, so the laws concerning i ndividual health insurance are different in most states. This means that applicants for individual insurance will need to complete a brief medical questionnaire when applying for benefits and, unlike a group insurance policy, in most states a company can decide not to cover people with very serious medical conditions (e.g., HIV or cancer), deeming them “uninsurable.”
How are premium rates determined?
In the vast majority of states, when you apply for Individual Health Insurance Plans, you are asked to provide health information about yourself and any family members to be covered. When determining rates, insurance companies use the medical information on these applications. Sometimes they will request additional information from an applicant’s physician or ask the applicants for clarification.
If the insurance company is unable to obtain information necessary to accurately determine the risk of a particular applicant, it will underwrite more conservatively, meaning that the assumption relative to the missing information will be negative rather than positive.
Once the company has determined your health status, you will be assigned a rate class by the company and put 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.
To help prevent adverse selection, insurance companies are allowed to look back at your medical history for pre-existing conditions and may choose not to cover certain conditions for a specified period of time. This is known as an exclusionary, or pre-existing condition, waiting period. The amount of time an insurance company can look back at your medical history, and the length of time an exclusionary period can last, vary on a state-by-state basis.
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