Finding Affordable Health Insurance When You’re On Your Own
In America's current healthcare system, in most cases, you're better off with the crowd. Usually, that crowd is your employer or a government pool like Medicare or Medicaid. But sometimes, due to choices you make, or circumstances you can't control, you end up on your own, with full responsibility for your healthcare expenses. Here are some circumstances under which you might end up needing to seek affordable individual health insurance:
- You lose (or quit) your job.
- You have insurance through your spouse or partner, and they lose or quit their job.
- Your employer or your spouse's stops offering insurance for you or your family.
- You change jobs, and your new employer has a waiting period before you become eligible for coverage.
- You take early retirement.
In some other circumstances, you may have the option to participate in group medical insurance, but it's not in your financial interest to do so.
- You are young and healthy, but your employer group has a lot of older, sicker people in it, and your employer makes you bear much of the premium cost for either yourself or your dependents. Keep in mind that if you find yourself in this situation and you opt for your own insurance, you help yourself, but also make it harder for your employer and your co-workers to afford coverage.
- The group plan you are eligible to participate in doesn't meet your needs. For example, it does not cover doctors or hospitals where you live, or it does not cover particular health condition that you have or are at risk for, or the plan offers richer benefits than you want to pay for.
In any event, if you are shopping for individual health insurance, you need to keep in mind several important things.
First of all, if you're choosing to voluntarily switch from group to individual coverage, you need to carefully consider what you're giving up: government protection from discrimination by insurance companies.
In the group insurance market, the government prohibits discrimination against people by age or health condition. Your employer can't legally charge you more in premium, deny you coverage, or offer you a reduced benefit plan because you're sick. In the individual market, insurance companies put you through a process called, “underwriting,” which means they'll only offer you coverage if they think they'll get more from you in premium than they'll pay in claims.
You can look at it as a gamble — the insurance company is betting that you'll stay healthy (if it's not a good bet they'll deny you coverage); you're betting that you'll get sick and need healthcare. Underwriting helps them detect if you're trying to “game the system,” by looking for insurance while you're expecting big medical bills.
The side effect of this is that older or less healthy individuals end up paying higher premiums, and can even have trouble obtaining any coverage at all. So the game is very different if you're a 50-year-old female who smokes and suffers from diabetes (you can pretty much forget about getting commercial insurance) than if you're a 25-year-old male with no previous health problems (companies will be lining up to offer you coverage).
This is one of the wonders of America's healthcare system — those who need coverage the most are least able to obtain it. It's also the Achilles heel of presidential candidate John McCain's health reform proposal — his plans would drive more people into the individual insurance market without adequately addressing this issue. (The Democrats' plans have problems of their own.)
Shopping for insurance
But right now, you're not trying to solve the nation's health care crisis, you're just trying to take care of yourself. Here are some things to consider as you shop.
- How much risk can you accept? If you can handle a higher deductible, you will save on premiums, and if you stay healthy, you get to keep the money.
- How much premium can you afford? In individual health, you have to keep paying the premium, or you are no longer covered.
- How able are you to save? If you have trouble saving, you will want a lower deductible, or you'll need to have an emergency fund so that a surprise medical bill doesn't put you in financial trouble.
- How important is choosing your provider? If you want more choice of providers (doctors and hospitals) and treatments, you'll want to make sure your doctors are in the insurance plan's network. If saving on premium is the most important, you may want to consider an HMO. HMOs can provide excellent care at a low cost—they often do a better job at coordinating care than other carriers. But if you disagree with the HMO's decisions about your treatment plan, you might end up unable to get the treatment you want. (There's also some risk of that with other carriers).
- Is having coverage for alternative or complimentary medicine (such as massage, chiropractic and acupuncture) important you you? Is it covered? Subject to what limitations? If coverage for these services is optional in your state, it may be cheaper for you to save for them yourself.
- What's the reputation of the insurance company? Any insurance company is going to have some unhappy customers, but you do want to look for a reputable carrier.
- Tax implications. If you're considering a lower-premium plan with a higher deductible, make sure that it's a Qualified High Deductible Health Plan. With such a plan, you can open a Health Savings Account, where you can save pre-tax money on the condition that, when you withdraw it, you use it to pay for medical expenses. These medical expenses can be used for expenses that apply to deductible, or even for expenses simply not covered by your insurance plan. Depending on your tax situation, this can give you substantial savings.
- Discounts. Insurance companies typically get discounts from providers through a Preferred Provider arrangement. This benefits you because you won't end up stuck with the bill if your doctor's charge is over what the insurer considers reasonable. The downside is reduced provider choice. Large insurers, or those who give strong financial incentives for you to see a limited group of health providers typically get the best discounts.
- Utilization patterns. Insurance companies have learned from experience that people with higher deductibles and co-pays use fewer health services. Getting less medical care can be good, because unnecessary treatments don't help, and might harm your health. It can also be bad if you avoid getting treatment or preventive care that you need to stay healthy. If you choose a higher deductible, or a plan without preventive care benefits, make sure you budget enough money to get care for any chronic conditions you have (you don't want them to get worse!) and get regular checkups to make sure any new conditions are detected early, when they can be treated effectively.
- Maternity care. If maternity care is optional in your state, the only people who buy it are likely expecting an imminent pregnancy, and rates are set accordingly. You may be better off just paying cash for maternity care.
- Other riders. Your agent will likely offer you accident riders and other forms of supplemental coverage. These can have low premiums, but they're low risk to the insurance company as well.
- Finally, look for limits on the plan. Many plans offer lifetime maximums of $2 million or more. Other limitations can include mental health care, chemical dependency, chiropractic care, physical therapy and diagnostic care. Beware of plans that limits your benefit to only a few hundred dollars a year. For example, I had some friends who signed up with a high deductible plan to save on premiums, but discovered too late that their plan had a $300 annual limit on benefits for diagnostic care. Once that limit was met, they were on there own. You can't buy much diagnostic care in today's healthcare environment for $300.
What if you cannot find coverage?
Now that you've done all this work, you still could find yourself in a situation where you can't afford — or simply can't purchase at any price — health insurance that meets your needs. You're not alone. In 2006, 47 million Americans found themselves in a similar bind, and the number has only increased since then as costs have risen and employers have reduced coverage. You still might be able to find help. Here are some options for you to consider:
- If you have a low income or are disabled, look for government assistance. Medicaid benefits may be available. Even if you have a moderate income, Medicaid or SCHIP coverage may be available for your children, as a lot of attention has gone to the needs of the uninsured.
- If you have health conditions that make you an unattractive risk to commercial insurers, look into these options:
- COBRA or continuation coverage from your last group health plan. It's expensive, and it only lasts 18 months, but it's better than no coverage if you face a significant health risk.
- A state high risk pool or mandated basic plan. (Contact your state department of insurance for details.) Insurers aren't going to line up to tell you about this, but your state may require them to accept you for a certain health plan. Again, premiums will be high, and benefits may be limited.
- Look for work at a employer (preferably a large one with lots of young, healthy employees), who offers better health benefits.
- If you're disabled, see if you qualify for Medicare disability. Medicare isn't just for the elderly, it's also for people who are disabled.
- Move to any other industrialized country, and you're covered cradle to grave.
- Move (or travel) to a developing country, where you still might not be afford insurance, but medical care can be much more affordable. Surgeries costing tens of thousands of dollars might be available for hundreds to thousands of dollars in Mexico or India (plus airfare), with excellent quality. If you're nervous about the cultural and linguistic barriers, look at it this way. There's a good chance your doctor here has a foreign accent too.
- If you can't get insurance at all, ask for a cash discount. Some providers will give you a discount similar to what insurance companies receive if you pay cash up front. Point out to the provider that they won't have to haggle with the insurance company or wait for payment if they take your payment right away. Some providers will give good discounts if you ask. Others actually charge more if you don't have commercial insurance.
- Some services that you could fomerly only get in a doctor's office are increasingly available at drug stores and Wal-Mart. Make the most of these services.
- When you do visit the doctor, make the most of it, and ask lots of questions. Take notes, either during the visit or after. Ask the doctor how you can stay well, not just how to treat what's wrong with you at the moment.
- Manage chronic conditions. If you have asthma, heart disease, diabetes or another chronic condition, learn all you can about it. Manage it yourself, with advice from your physician. You'll end up saving.
- Take care of your health. Exercise. Eat healthy amounts of healthy food. If you smoke, stop. You'll feel better, and you'll probably spend less on health care.
Does this seem daunting? For more and more Americans, it is. Seem hopeless? For many people right now, it might be.
An archaic system
The reasons for this state of affairs are complex. It's based on a patchwork of systems that has grown up over time, and changing technology has made them obsolete. Long-term, more and more people are going to face this difficulty — not just poor people. Medicare is projected to run a deficit in 2018, and Medicaid coverage will need to drop unless more money is made available.
While this article has been focused on how to meet your current needs, perhaps my best advice is to write your elected officials and urge comprehensive change. To effectively solve our health care problem we need comprehensive reform, which must include cost controls (conspicuously lacking in the proposals from the Democratic presidential candidates) as well as coverage for everyone (conspicuously lacking from the Republicans' proposals).
In the meantime, the best you can do is to research your options, and make the best choices you can.