Going It Alone on Care: Shopping for an Individual Health Policy Has Pitfalls

By Pamela Yip, The Dallas Morning News

May 15–For most people, finding health insurance hasn’t been a problem. They get it through an employer, or they’re on a spouse’s policy.

But more and more consumers are having to buy individual health coverage, for a number of reasons.

They’re self-employed or work for a small business that doesn’t offer coverage. Or they retire early, forcing them to find so-called bridge coverage until they become eligible for Medicare. Or perhaps they divorce, costing them coverage under their former spouse’s policy.

“About 17 million Americans buy their own health insurance every year,” says Ellen Laden, spokeswoman for Golden Rule Insurance Co., which sells individual health insurance coverage.

What’s more, she says, “that number is growing every day as small businesses struggle with health insurance costs.”

There are major differences between group health plans provided by employers and individual health policies.

“Generally, when you’re buying an individual policy, there are no guaranteed admissions,” says Ben Gonzalez, spokesman for the Texas Department of Insurance.

“They will look at pre-existing conditions that could disqualify you or cause your premiums to rise,” he says.

Group plans are generally required to accept all members of the group for coverage.

“In a group plan, the insurance company generally may not use the health-related factors of a member of the plan as a basis for canceling or refusing to renew the entire group plan,” Mr. Gonzalez says.

“But you may pay more in premiums as a group the next time around.”

Individual health policies are typically more expensive, because there are fewer people to share the risk of claims.

You’re also shouldering the entire insurance premium in an individual health plan vs. splitting it with your employer in a group plan.

In Texas, an employer must pay at least half the cost of the employee-only health insurance benefit.

“With an individual plan, the consumer pays 100 percent of the premium cost,” says Ms. Laden. “With a group plan, the consumer pays only a fraction, or perhaps even none of the premium cost. An individual plan, therefore, would always cost the consumer more.”

Consider a healthy, 35-year-old nonsmoking male who chooses an individual health plan that offers access to a preferred provider organization that requires a $1,500 deductible, with 80/20 co-insurance and co-payments for doctor visits and prescription drugs.

The insurance would cost him $135 to $170 a month, according to Jason A. Milz, an insurance broker at Insurance Producers of America in Dallas.

Those same benefits with a group PPO plan would cost him $80 to $130 a month.

Health Savings Account

Under a Health Savings Account with an $1,800 deductible, the benefits would cost him $100 to $130 a month.

A Health Savings Account allows people to save for health care expenses tax-free, but to qualify for the tax benefits, account holders must have high deductibles. The higher costs make it essential to be a wise shopper for individual policies.

“With an individual plan, it’s important to consider what you really need,” says Mr. Gonzalez.

Whatever your needs, definitely shop around.

“There is quite a bit of variation in price and coverage,” says Rod Bordelon, Texas public insurance counsel, who represents consumers before the Texas insurance department. “There is bare-bones coverage to full-fledged Cadillac policies.”

Common types of health care coverage you usually can buy as an individual include:

–HMO plans — These are managed care plans offered by HMOs that pay for covered health services as long as you use your HMO’s network of providers or receive preauthorization for obtaining care outside the network.

–Major medical policies — These cover hospital stays and physician services in and out of the hospital.

–Hospital surgical policies — These cover only expenses directly related to hospital and surgical services, such as daily room, surgery and doctor charges.

–Hospital indemnity policies — This coverage pays up to a fixed amount for each day you’re in the hospital.

–Specified or dread disease policies — These cover specific illnesses, such as cancer or AIDS. This coverage also may be offered as a rider to extend the other types of individual coverage.

–Short-term policies — These last for only a specified length of time, not to exceed 12 months. These are most often purchased as a fill-the-gap measure by people who lose coverage for some reason but expect to regain it.

“As a rule, it’s better to buy one comprehensive HMO or major medical policy,” according to the Texas insurance department’s guide to health coverage.

“The other types of individual plans may cost less, but they usually provide fewer benefits or may duplicate coverage that you already have.”

Fewer protections

Lisa McGiffert, senior policy analyst at Consumers Union in Austin, says individual health policies are “pretty unfriendly plans for consumers to sort through.

“You have fewer protections in an individual plan,” she notes. “With individual plans, you are out there on your own. Whatever health problems you’ve experienced, chances are, you’re not going to be able to get any coverage for it.”

Most mandated benefits, such as annual mammograms, childhood immunizations and prostate screenings, are available from individual health plans.

However, the insurance company may offer “riders” that modify, expand or restrict an individual policy.

“There are no two plans that are just alike,” says Dianne Longley, special projects director for the life, health and licensing program at the Texas Department of Insurance. “It can be challenging.

Consumers “need to look at a lot of different factors, based on what their health needs are.”

For example, if you’re taking a drug for a specific condition, make sure your medicine is on the insurance plan’s list of approved drugs.

Individual policies also are less likely to include such benefits as rehabilitation services and home health care services, Mr. Gonzalez says.

And maternity services typically aren’t covered by individual health plans, Ms. Longley says.

“In some cases, you can buy a rider, but it’s very expensive,” she says.

Women especially need to ask extra questions when buying individual coverage.

“You need to ask whether maternity services are covered, whether well-woman checkups are covered,” says Alina Salganicoff, director of women’s health policy at the nonprofit Kaiser Family Foundation, which studies health care issues. “Is there a good network of physicians in these plans?”

The foundation says women are less likely to be eligible for or to participate in their employer’s health plans, because they’re more likely to work part time, have lower incomes or rely on spousal coverage.

“It puts women in a more vulnerable position,” Ms. Salganicoff says. “Should they become divorced or widowed, their source of coverage — their husband — disappears.”

In the end, searching for an individual health insurance policy isn’t easy, but if you do your homework, you may find one that meets your needs.

“People are used to having someone else pay for their health insurance costs when they’ve worked for an employer,” says Ms. Laden of Golden Rule.

“When they go into the individual market for the first time, they experience sticker shock,” she says. “Affordability and accessibility to quality health care are really the keys in looking for individual health insurance.”

E-mail pyip@dallasnews.com

How to select an individual health insurance policy

When it comes to shopping for individual health insurance coverage, you must do your homework.

“Always work with a licensed insurance agent and, if possible, someone who specializes in health insurance,” says Jason Milz, an insurance broker at Insurance Producers of America in Dallas.

Avoid purchasing a policy directly over the Internet. “There are many sites out there that claim to do the comparison shopping for you to find the best value, but in reality all they are doing is finding the cheapest plan,” Mr. Milz says. “In health insurance, you get what you pay for.”

Make sure you’re working with a reputable insurance company. You want your insurance company to be there when you need to tap your benefits. It does you no good, if the company runs into financial trouble and goes out of business.

You can find out about the financial health of the company by checking its rating with A.M. Best at www.ambest.com.

Look for an individual health plan that’s tied to a national association. “These plans provide the lowest rates, stable premiums and additional benefits, because you are joining a large group,” Mr. Milz says.

A good place to start is www.abba-association.com, the Web site of America’s Business Benefit Association.

The group is a nonprofit organization composed of families, individuals, employers and employees. The group gives individual members the clout and protection of a large organization.

Find an individual health plan that covers you on the job. “Business owners and self-employed individuals are not always covered by workers’ compensation plans, and many health plans exclude on-the-job injuries,” Mr. Milz says.

Get a plan that travels well. “Some plans do not cover outside the U.S.A.,” Mr. Milz says. Some may not cover you outside the state. “Be sure and choose a plan that does not have any geographical limitation.”

Stay away from limited- benefit plans. Many companies offer plans that have daily limits on items such as room and board, intensive care, surgeons and other miscellaneous charges.

“With today’s mounting medical costs, a policy that offers a $25 office visit and a $15 prescription at the expense of coverage for a $250,000 medical emergency is not adequate protection,” Mr. Milz says.

For more information about buying health insurance, go to www.texashealthoptions.com. This Web site is run by the Texas Department of Insurance

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