What Is Individual Insurance?

Most people who have health insurance are covered through employer group plans, resulting in lower rates for an individual due to the shared health care risk pool. When a person is self-employed or works for an employer who does not provide health insurance, he must purchase individual health insurance policies. Many large insurance companies offer health insurance policies for individuals, and these policies often differ in coverage and cost than the standard group insurance coverage plans.

Types

• There are several types of individual health insurance plans that range from the basic major medical plan that covers medical risk, called an indemnity plan, to managed care and preferred provider plans that have enrolled medical providers patients access for care. Some plans offer menu-style options that allow for customization of coverage and can reduce premium costs. Selecting a quality, affordable insurance plan is a major consideration; therefore, a thorough review of available options is important.

Features

• An indemnity insurance plan covers medical risk and allows the use of any medical provider. These plans have deductibles and co-insurance, which increase out-of-pocket costs.

  Managed care or preferred provider insurance plans have in-network providers that require a co-payment when accessed. A patient's out-of-pocket costs may be lower, but her freedom to utilize any provider is reduced.

  Menu-style individual health insurance options allow for the customization of coverage, which means coverage options that are not needed, such as maternity coverage for a non-childbearing age individual, can be carved out.

Benefits

• Policyholders can reduce premiums (monthly costs) on indemnity-style policies by increasing deductibles and co-insurance. Managed care options come with higher co-payment options (the amount paid to the provider per visit) that help in reducing premiums. Basically, less coverage means lower premiums.

  An individual medical evaluation helps determine which individual health insurance option is the better choice. This review should include not only past medical history, but also a projection of future medical possibilities.

Group Plans

• Group insurance plans spread the health care risk over the entire group, thus reducing the rates for coverage. For individual health insurance policies, one way of keeping premiums low is to join a group or association and purchase the health care policy through that group. Such groups include industry associations, Chambers of Commerce or local business associations that offer access to insurance. Most of these groups have several affordable insurance plan options from which to choose.

Considerations

• Individual health insurance is a large part of the health care reform discussion, especially as small businesses grow in number.

  When considering individual insurance plans, always check with the local health care insurance commission to ensure the plan selected is in good standing. Some states have guarantee issue laws, which means the insurer cannot exclude pre-existing conditions. But it is always good to check the insurer's list of exclusions, pre-existing conditions and dispute/arbitration policy.