It is very possible to get cheap individual health insurance if you follow the right steps. But before we discuss what to do and where to look, let me explain very briefly why individual health insurance plans are not as cheap as group plans. I will also explain why you should look carefully before you jump at any supposedly cheap individual health policy.
Why Individual Plans are More Expensive than Group Plans
- When you sign up for an individual plan, you pay 100% of the premiums but if you have employer-provided group health insurance, you pay only a percentage while your employer pays the rest.
- Premiums for group plans are based on the average age and/or average risk profile of the group members while premiums for individual plans are tied to your own risk profile and age.
- Premiums cannot be raised arbitrarily for group plans but it is possible with individual plans.
- Health insurance companies may discriminate based on pre-existing conditions for individual plans but they can’t do that with group health insurance. Expect changes as a result of the recently passed health care reform.
Cheap premiums, more often than not, mean more payments later, or smaller benefits, or both.
Here’s why. Insurance companies have to make money to ensure that they remain viable businesses. So, if you pay cheap premiums you often have smaller benefits that can be covered by your premiums, or you may be asked to pay higher deductibles, copays or coinsurance rates.
So, How Can You Get Cheap Individual Health Insurance?
- The first and most important step to take is learn how health insurance works. You can learn a lot here on Placblog.com
- The next step is to compare several options from several health insurance companies. You can compare plans at ehealthinsurance.com
- If you cannot afford any of the plans you have seen, ask the agent if they offer customizable policies that can fit into your budget. But remember, these customizable plans may have smaller benefits and may be more restrictive.
- If you have access to a group plan (e.g. your trade association, or AARP if you are above 50 years) find out about the plans they offer.
Some Important Tips
- Calculate the annual premiums and make sure it is something you can afford before you sign up.
- Before you decide on which one is cheap, compare the premiums, benefits and your health care consumption. Sometimes plans with higher premiums may have better benefits and so may turn out to be “cheaper” in the long run.
- Make sure the policy you choose has a 30 day free-look period. This will allow you to cancel your membership and receive a full refund within 30 days of signing up as long as you have not received any benefits.
- Make sure the plan you choose is actual major medical health insurance and not one of those plans that don’t cover your hospital expenses. e.g Some plans do not cover your actual medical expenses but they either negotiate a discount for you with your health care provider or they pay you a pre-determined sum per day irrespective of the amount of your medical bills.
- Ask your your doctor or health care provider if they accept the policy you want to sign up for before you decide.
- Learn more about the company, it’s claims process, it’s client satisfaction.
- Don’t cancel your current health insurance until your new one is in effect.
- Assess your health needs and choose accordingly. Don’t chose based on cost alone.
- Read my previous post about what NOT to do when looking for cheap, affordable health insurance.
This is the beginning of a series in which I try to explain some health insurance terms, because I am convinced that an essential part of getting the best health insurance possible, is understanding health insurance terms. Or as the title says, your ability to “speak health insurance” well.
For most people, the answer to the title question is NO, and this is not surprising. The language used to describe health insurance is often very confusing. But if you do not understand it, how are you going to be able to make good buying decisions?
So, in this series, we will talk about several health insurance concepts like premiums, benefits, co-pays, coinsurance, provider networks, adverse selection, underwriting etc.
For this first post, let’s start out by discussing two fundamental concepts — Premiums and Benefits
Health Insurance Premiums
- Your health insurance premium is the amount of money your health insurance company receives so they can provide health insurance benefits for you.
- You have to pay premiums to be eligible for benefits, and you are responsible for the payment of your premiums. However, if you have employer-provided health insurance, your employer may pay a portion of your premium for you so you pay smaller out-of-pocket amounts.
- Health insurance premiums are often paid monthly but may differ depending on the policy you have.
- You should make sure you have details about your premiums before you sign up for a new health insurance policy. At the minimum, find out how much you will pay per month (and per year), if your employer will cover part of it, and how often you will have to make payments.
Health Insurance Benefits
- Your health insurance benefits include all health services and products you are eligible for as an owner of a health insurance plan.
- You can find detailed information about the benefits you qualify for in your insurance policy.
- Your insurance company will be responsible for any health care provider bills that are covered in your benefits. As a result, they take great pains to clearly identify services and products that are part of your benefits, and those that are not.
- To receive your benefits, you will have to follow the claims process specified by your heath insurance company. Some companies pay directly to you health care provider, while some may ask you to pay and submit a claim for a refund. You need to know this ahead of time.
Benefits are affected by two very important health insurance concepts. They are
- Annual Benefit Cap
- Lifetime Benefit Cap
Annual Benefit Cap
- This is the total dollar amount an insurance company will pay as benefits to you in one year.
- In any given year, your health insurance company will NOT exceed the amount stated in the annual cap.
- At the beginning of every new year, this annual cap resets to zero so you can begin to enjoy benefits again.
- Here’s an example. If you have an annual cap of $75,000 and you have medical bills that total $90,000 in that year, your insurance company will cover up to $75,000 and you will be responsible for the extra $15,000.
Lifetime Benefit Cap
- This is the total dollar amount an insurance company will pay as benefits for your health care expenses over your lifetime.
- Lifetime caps only apply as long as you continue to have that same insurance policy.
- Unlike the annual caps, lifetime caps do NOT reset at the beginning of every year so all your health care benefits are added over time.
- With the passing of the new health care reform, annual caps and lifetime caps will no longer be allowed.
That’s all folks!
In future posts I will explain deductibles, coinsurance, co-payments, and more. In the meantime, feel free to ask questions or make a comment below.
This is a question many people will like to find an answer to. I saw this slide show and it seems to answer it. Although it was created before health care reform was passed by congress, it is still very informative. Authors, Dan Roam and Tony Jones, do a great job of explaining health care and health insurance in America.
Enjoy it and share your thoughts below.
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| Photo credit: Peter Kaminski |
At some point, we have all had to think about getting affordable health insurance that also meets our health needs. The problem however, is that insurance plans that are “affordable” or “cheap” at the time we buy them, often become very expensive at the time we need them because of several hidden costs and conditions associated with such plans.
For this first post we will like to talk about this problem, but in a slightly different way. We will highlight common mistakes people make that practically guarantee that they don’t get the best affordable health insurance plan they qualify for.
So, Here’s Our List of How NOT to Get Affordable Health Insurance. Feel free to add to the list in the comments section below.
1. Do NOT Compare Plans – Many people make the mistake of buying the first plan advertised to them. Never do that. No matter how nice the first plan advertised to you looks like, be patient enough to compare it with other plans. You may be shocked at what you find. Also, when you compare plans, compare several plans within a particular insurance company and across several companies.
2. Ignore the Hidden Costs – Technically speaking, these costs are not hidden, but since most people don’t look out for them, I guess the name hidden is justified. In addition, these costs are usually responsible for transforming what was initially advertised as an affordable health plan, into an expensive plan. Some of the “hidden” costs to look out for include high deductibles, coinsurance, and copays.
3. Focus Excessively on the Premiums and NOT on the Benefits - It is true that before you can truly call a health insurance plan affordable, you have to be able to pay your premiums. But never forget that the main reason you have health insurance is because of the benefits you hope to enjoy whenever you seek health services.
Pay attention to the benefits your plan offers and always ask yourself if the benefits of a particular plan are sufficient enough to prevent you from going broke if you need health services.
4. Ignore Your Current Health Status and Your Health Consumption - This may sound stupid, but it is very important, and many people don’t consider this enough when buying health insurance. Simply put, if you have any chronic medical condition, look for plans that offer you those specific services you need.
5. Don’t Read the Fine-print - It may look like a waste of time to do this, but people who don’t, almost always end up learning the hard way that this was a bad decision.
6. Don’t Read Client Reviews – Yes, reading reviews are helpful when done right. When you read the reviews, try to understand what the real issue is and separate that from the emotions they show. Also remember that many reviews are negative because we as humans are more motivated to write about negative experiences with insurance companies than positive experiences and so negative reviews seem to outnumber the positive ones.
8. Do not Consider Your Long term Goals and the Cost of Changing – A typical example is signing up for an individual health insurance plan with the most “affordable” company and then finding out when you want to upgrade to a family plan that their family plans are more expensive than the others. In addition, the cost of changing your plan at that time, including the waiting period for the new plan are so high that you would have been better off starting out with a different plan.
9. Be Satisfied with Small Provider Networks – You may live and work in a particular city and don’t envisage any move in the near future, but that is not a good reason to sign up for a plan with a small provider network. You may move to a new neighborhood, or get a transfer, or a new job with health insurance options that are not as good as your current one. At that point you may be forced to use out-of-network providers and they often come at higher costs to you.
10. Share your own insights, from your experience, about things you did, or did not do while trying to get affordable health insurance and how they worked out for you.