Individual health insurance is the solution for a company that wants a “hands-off” strategy for company health insurance. Through the individual coverage option, the company contributes either a fixed dollar amount to an employee or nothing to help fund the health program. The employer then simply gives employees access to a Web site or insurance agent, from which/ whom employees can purchase and pay for coverage with the employer’s supplemental contribution.
Here is a summary of the major forms of individual health insurance currently available:
Health Maintenance Organization (HMO)
Health maintenance organizations are the oldest form of traditional managed care group health plans and, generally, one of the least expensive options for businesses. HMOs serve a designated geographical area.
An HMO may be a single entity of providers and facilities under one roof, or a network of providers and facilities. In both cases the employee must choose a primary care physician, who acts as a gatekeeper for allowing the employee to seek other care.
The relative low cost and reduced paperwork have made HMOs popular choices for businesses. But their lack of flexibility has made them less desirable to employees, who find that they may have to change their health care providers and must obtain a referral before visiting a specialist within the HMO network. Insureds have no coverage for care outside the network.
In addition, to combat the rising cost of health care and to remain competitive, many HMOs are now charging deductibles or increasing copayments. This may make HMOs less attractive to employees.
HMOs still offer among the lowest costs for businesses, according to a number of surveys, and may be the appropriate choice if your business operates in one geographical area. However, if you have operations in more than one area, you may have to contract with different HMOs, which may differ in price, services, and reliability. In that case, you should engage an insurance representative who has the resources to package coverage by several different HMOs.
Preferred Provider Option (PPO)
With the preferred provider option (PPO), you receive a list of medical providers and facilities to select from when you require health care. Each has been screened to enable you to receive a high standard of medical care. This type of coverage typically pays for hospital room and board, physicians' and surgeons' fees, lab services, and much more. By utilizing preferred providers from the network, the coinsurance payments required of insureds is lower. Using non-network providers requires higher coinsurance payments from the insured.
Short Term Medical
Short-term medical (STM) plans provide individual and family coverage from 30 days up to 6 months. These plans are major medical plans designed to protect you and your family when temporary health coverage is necessary for a specific amount of time. A short-term medical plan is ideal for individuals who are between jobs or in need of immediate coverage while they shop for more permanent coverage. Preexisting conditions are not covered.
A group health insurance policy is issued to a company, and employees of that company receive benefits according to the terms of the policy. Group health insurance is generally “guaranteed issue,” meaning that all individuals who meet the eligibility requirements determined by the company qualify to receive coverage, regardless of their individual health conditions.
Individual health insurance differs from group insurance in three major ways:
- First, individual health insurance is not guaranteed issue. Each employee must apply for the insurance coverage by providing information about his or her health history. The insurer then evaluates this information and elects whether or not to offer the employee coverage. Because of this, the per-person cost of individual health insurance is usually lower than that of group insurance, particularly for employees who are younger or who have maintained good health.
- Second, an individual health insurance policy is issued to an individual or family, not a company. Thus, the health insurance coverage is not conditioned on employment. This means that when a person changes jobs, his or her health insurance remains with them (i.e., it is portable) as long as monthly premiums are paid. Additionally, the insurer is able to spread the cost of insurance over its very large pool of individual customers, so the monthly premium of one member is not adversely affected by high expenses incurred by another insured.
- Third, individual health insurance is personalized. Each employee can select the insurer, provider network, and coverage levels that suit his or her needs; a single plan does not need to be selected by the employer.
Individuals with Existing Health Conditions
A study by America's Health Insurance Plans revealed that approximately 12 percent of applicants are denied coverage because of preexisting medical conditions (Employer Health Benefits 2004 Annual Survey Kaiser—Kaiser Family Foundation and the Health Research and Educational Trust). Each individual insurer sets the guidelines under which it will approve an applicant. However, if an individual does not qualify for coverage, in most states, he/she may be eligible for guaranteed coverage under HIPAA or state-run pools.
The greatest financial worry most people with preexisting conditions have is losing their health insurance if they are no longer able to work.
Three-fourths of the millions of families who have filed medically-related bankruptcy had health insurance when they first became ill but lost their health insurance when they could no longer work. Individual and family health insurance helps to solve this problem because individuals do not lose their insurance if they lose their job, as long as they continue to pay premiums.
Individual and family health insurance offers a priceless benefit—the peace of mind that comes from having access to affordable health insurance regardless of what may happen to one’s job or preexisting health condition.
Options for Those with Preexisting Conditions
During the health insurance underwriting process, insurers have several ways of handling individuals with unfavorable health history, including:
- Extended Waiting Period: The health insurance policy might grant coverage, but impose waiting periods for preexisting conditions.
- Premium Surcharge: The person can still obtain an individual and family policy, but at a higher premium (or insurer rate-up) for the insured with a preexisting condition.
- Exclusion: The policy might specifically exclude coverage for a stated preexisting condition.
- Decline coverage: In a worst-case scenario, the insurer may elect to not insure the person with the preexisting condition. Generally, though, the declination is limited to the specific individual with the prior health history; family members are still eligible for coverage.
If an employer-sponsored group plan is cancelled by the employer, employees with preexisting conditions may be able to apply as HIPAA-eligible to a health insurance provider and receive a state-subsidized, guaranteed issue policy that can cost, on average, two times that of a healthy individual. These plans are also available to employees who exhaust their COBRA benefits. In order to qualify for HIPAA coverage, they may not have access to any health insurance coverage.
In some states, if an employer-sponsored group plan is cancelled by the employer, employees may qualify for subsidized state-guaranteed insurance with no exclusions for preexisting conditions, and they may receive coverage that is similar to that of a healthy employee and also about twice the cost.
The cost, coverage, and availability of state-sponsored health insurance for individuals who are unable to purchase standard individual health insurance differ from state to state. This coverage, though, is typically the same as for healthy individuals except that the state pays the insurer for excess losses attributable to the preexisting conditions.