The Basics of Choosing an Individual Health Insurance Plan
by Tamara Quiram

More and more people are turning to individual health plans to protect themselves and their families as fewer employer offer health insurance. Many health insurers offer individual plans including the most recognizable names in the industry. But not all plans are created equal.
Plans vary by more than just cost. Some cover catastrophic events; some focus on day-to-day expenses; some replace major medical plans; and others just help your client get through a tough spot. The following are some tips for helping your client pick the best plan for their needs.

Take Care of Yourself

Since individual plans are underwritten based on health status, costs are lower for those who take better care of themselves. For example, smokers pay more under an individual plan and, of course, some people may not be eligible for individual insurance because of risky behaviors or chronic disease. Staying in good shape is the single most important thing your client can do to maintain their healthcare options. It’s like the difference between someone with a good driving record who is looking for lower car insurance rates compared to someone who has a lot of tickets or accidents. Premiums typically vary by age, gender, and location. It is important for your client to disclose any preexisting conditions during the application.

Inventory Your Assets

A client who has enough cash on hand to cover their first $5,000 to $6,000 in healthcare expenses may want a high-deductible health plan. With these plans, the premiums are lower and they can add a health savings account to take advantage of tax-deferred savings. If your client does not have enough cash to cover a higher deductible, consider a plan with a lower deducible even though the premiums are higher.

Weigh Risk Versus Cost

A client who is not comfortable taking some risk should choose a plan that provides coverage against catastrophic events. In contrast, a client who is young, healthy, and on a budget may want a less comprehensive plan, such as an annual maximum plan. Your client can select a $1,000 deductible plan for about the same premium as a much higher deductible major medical product.

However, there’s a limit to how much these plans cover in a year -- typically around $100,000 to $250,000. For most conditions, the cost of treatment will fall below the annual maximum. If the cost of treatment exceeds the annual cap, your client will pay for the cost of additional treatment during the remainder of that calendar year. Once again, it all depends on how much risk your client is willing to shoulder.

Consider Your Time Frame

Clients who are likely to need individual insurance for a long time, such as small business owners, should consider a plan that renews annually. A short-term medical plan is an option for a client who needs individual coverage for less than a year because they expect to be eligible for a group plan.

Short term medical is designed for people in transition. It provides a bridge until your client can get a more comprehensive plan through an employer or Medicare. With short-term medical, applicants can choose the length of their policy (typically up to a year). They can also choose the deductible and the payment method. These plans are also notable for their easy application process and quick issue.

Look Before You Leap

With insurers offering free quotes on individual health plans, it’s easy to compare plan design and costs. One word of caution for your clients: Always make sure you’ve been accepted into a new plan before canceling your old one. You don’t want to be uninsured.
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Tamara Quiram is a director with Humana’s individual health business, HumanaOne. Based in Waukesha, Wisc., Quiram has been with Humana in various underwriting and financial functions since 2002. In her current role, her responsibilities include developing financial reporting procedures/processes and creating key metric reports. Before coming to Humana, Quiram worked at Independent Care (iCare) and American WholeHealth Networks Inc. (AWHN).