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A Step-By-Step Guide to Buying Individual Health Insurance

Last updated June 24th, 2020

Reviewed by Frank Lalli

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Shopping on your own for the right health insurance can be daunting. But it need not be, if you use this simple step-by-step guide.

The blueprint here explains where, when, and how you can buy individual health insurance. It also includes information to help you decide whether to buy an Affordable Care Act (ACA or Obamacare) plan on the Marketplace, or a very different non-Marketplace plan.

What You Need Before Buying Individual Health Insurance

Before you can enroll, be ready with your:

  • Birthdate
  • Home address
  • Social Security number
  • Household income for this year (a best estimate will do)
  • Information on how you file your taxes
  • Income and employer information 
  • Proper documents if you are a legal immigrant

Assess Your Needs

Before settling on a health plan, you should carefully consider your healthcare needs. How much care do you typically need? How often have you been sick in the last two years or so?

Also, is there a particular doctor you’d like to continue seeing? If you love your internist, OB/GYN, or other healthcare provider, make sure that doctor, hospital or urgent care center is in the provider network for the plan you’re considering. It’s always best to check directly with your doctor to be sure he or she accepts a particular health insurance plan going forward, even if you see the name in writing from the insurer. Insurance documents, especially printed network lists, can be six months out of date. Fact is, providers move in and out of networks constantly.

Depending on your health needs, you might consider a plan that includes a large network of doctors to give you more choices. Choosing a plan with an ample network is especially critical if you live in a rural community, where finding the right doctor nearby is often challenging. 

Important Details to Consider:

  • See which plans allow you to keep your current doctor(s) or provider(s);
  • Double-check whether your current prescriptions and specific dosages are on the plan’s approved list;
  • Make sure you have affordable access to providers who can address any of your ongoing and foreseeable medical needs. 

Check Whether You Qualify for a Subsidy

In 2020, if you make less than $49,960 per year individually or $103,000 as a family of four and don’t have health insurance at work or on your own, you may qualify for ACA government premium tax credits or perhaps even generous cost-sharing subsidies.

Where to Shop for Individual Health Insurance

Healthcare websites can help you compare different types of plans from multiple health insurance companies before you buy. Start with the ACA marketplace, healthcare.gov, or search on healthcare.com 

When to Purchase Individual Health Insurance

Normally, you can only get a health plan during a short window of time known as the Open Enrollment Period (OEP). For the current year, the OEP in most states runs from November 1 through December 15. Some states offer extended deadlines into late December for coverage starting in mid-January, while others extend deadlines into January for coverage beginning in February.

In some situations, you can buy coverage outside of the open enrollment window. Individuals can qualify for a Special Enrollment Period (SEP) if they recently experienced a life-changing event, such as losing their job and their employer-provided coverage, getting married, divorced, having a baby or adopting, or if citizenship status changes. These events and others are referred to as a “qualifying life event.”

Note that there are Special Enrollment Period (SEP) deadlines for submitting documentation to substantiate a life-changing event — within 60 days for an ACA plan on the Marketplace or commonly 30 days to change plans at work. 

Other circumstances that qualify people for an SEP include becoming Medicaid-eligible, or if you are Native American, and therefore change your health plan any month of the year.

Short-Term Health Insurance

If you’re not in OEP or you don’t qualify for an SEP, you can consider short-term health insurance plans to bridge you to fuller coverage. Short-term plans commonly run for 90 days, but can be renewed for up to three years in a few states.

In the 30 states or so where short-term plans are offered, you’ll find that they cost less and offer more flexible terms than ACA plans. Their premiums are generally lower. However, they offer fewer benefits and coverage.

For example, they do not cover preexisting conditions that have been diagnosed in the past two to five years, nor maternity. They may not offer some of the ACA’s 10 essential health benefits, such as hospitalization. Also, they do not qualify for government premium or cost-sharing subsidies.

Comparing Marketplace and Off-Marketplace Plans

Cost and benefits differ widely between subsidy-eligible Marketplace plans and less robust non-Marketplace plans. With subsidies, individual plans sold through the ACA Marketplace are almost always cheaper than non-Marketplace plans and always provide more benefits. Nearly 90% of ACA enrollees get government subsidies. For qualifying individuals, Marketplace plans may be subsidized with premium tax credits or cost-sharing discounts for treatment, as well as through Medicaid or the Children’s Health Insurance Program (CHIP). 

Memberships in some professional organizations, including the American Bar Association and Freelancer’s Union, offer a limited number of health insurance plans. Healthcare startups built around online medicine such as Oscar and Bright Health are also options, especially for tech-savvy consumers seeking individual health insurance.

In the right circumstances, short-term plans may be worth considering as a low-premium bridge to comprehensive coverage. Still again, in most states where short-term plans are not banned, they can be renewed time and again for at least 364 days. Roughly half the states allow renewals for up to three years. 

Whatever plans you consider, keep in mind that the “best” insurance plan for you depends on your financial situation and your particular healthcare needs. 

Weigh the Differences Between Major Medical Networks (HMO, PPO, EPO, and POS)

The type of insurance plan you select — HMO, PPO, EPO, or POS — determines how many providers you will have access to, as well as whether you’ll need a referral from your Primary Care Doctor (PCP) before seeing specialists, such as a dermatologist, cardiologist, or radiologist. Every plan on the ACA marketplace grants you all 10 EHBs. 

Alternative Options to Consider 

High-Deductible Health Plans (HDHP)

Consumers who choose a high-deductible health plan (HDHP) pay a smaller premium each month than they would in a low-deductible plan. However, they must pay thousands of dollars out-of-pocket in “deductibles” before the insurer contributes its first dollar for their medical expenses. So despite the lower monthly premiums, HDHP coverage can take a toll on your wallet if you get ill or injured. HDHPs do give you all the EHBs. 

HDHPs are often used in conjunction with a health savings account (HSA). An HSA is a type of savings account that lets you set aside pre-tax dollars to spend later on qualified health expenditures. Typically, HSA holders are issued a debit card backed by their savings balance that can be used to pay for things like dental exams, new glasses, doctors’ office visits, and other medical costs. 

While you get the tax advantage of depositing pre-tax savings into an HSA, the government limits the amount you can contribute in a given year. This year it’s $3,550 for an individual, $7,100 for a family. On the positive side, any unspent money in your HSA carries over into the next year, thereby allowing you to build a significant balance to cover treatment you may need later in life. Families with enough discretionary pre-tax money can get peace of mind by amassing substantial savings to cover their eventual health care needs. 

Catastrophic Health Insurance

Catastrophic health insurance is a special type of high-deductible health plan aimed at protecting young adults from truly catastrophic health events. The plans do cover preventive services, such as screenings and vaccinations. However, you must pay the first $8,150 in medical bills in deductibles before the insurance company begins to pay. Catastrophic plans are only sold to people under the age of 30 or to those who qualify for a hardship or affordability exemption.

Catastrophic coverage can be an option for healthy 20-somethings who want to gamble that they won’t get very sick or injured, whether from playing sports or in a car accident. Also, catastrophic plans are not eligible for government tax subsidies. So before you commit, get quotes for both catastrophic and other plans with subsidies. You may find that your income level qualifies you for more robust and less expensive plans, with the help of those subsidies, than a catastrophic plan. Bottom line: Catastrophic health insurance provides little more than a safety net against truly astronomical hospital bills. 

Compare Costs Before Buying Individual Health Insurance

The ACA has neatly categorized all individual health insurance plans into four metal tiers: bronze, silver, gold, and platinum. Every plan in all tiers covers the 10 EHBs; what differs is the cost-sharing you’ll end up paying. The question boils down to this: How much can you afford to spend?

Metal Tiers

When shopping for ACA health insurance quotes, the metal tiers help you understand your real treatment costs. Basically, the more expensive the metal, the more you’ll pay each month but the better your coverage will be when you need treatment. 

Bronze

Bronze plans are the most inexpensive but typically carry the highest out-of-pocket exposure. That means after the cost of your monthly premium, deductible, coinsurance, and copayments, a bronze plan pays only 60% of your healthcare bills. You are responsible for the remaining 40% of the costs.

Silver

Silver plans, the most popular ACA insurance, pay an average of 70% of your healthcare costs, including your monthly premium, deductible, coinsurance, and copayments. You are responsible for the remaining 30%.

Gold

Gold plans pay an average of 80% of all healthcare costs, including the monthly premium, and you are responsible for an average of 20% of the costs.

Platinum

Platinum, the most generous metal plan, pays an average of 90% of healthcare costs, leaving the policyholder with only 10% of the bill, on average.

When you’re comparing costs among different plans, never focus solely on a plan’s premium and deductible costs. If you need ongoing care, for instance, buying individual health insurance with a lower deductible and lower copayments may be your best option. You almost surely will end up paying a higher premium, but overall you could save a great deal of money out of pocket. On the other hand, if you figure to only use your coverage sporadically, a plan with a cheaper monthly premium may make more sense. 

Financial Guidelines to Keep in Mind

A plan that has a higher premium but lower out-of-pocket exposure may be a good choice if:

  • You go to the doctor frequently;
  • You take brand-name prescription medications regularly (Note: always check that your drugs and dosages are covered under the health plan’s approved list, called the formulary, or you may face very steep costs);
  • You are pregnant or have small children, especially kids in school;
  • You are likely to undergo a surgery in the coming year;
  • You require treatment for a chronic condition such as diabetes, asthma, clinical depression, or cancer.

A plan with higher out-of-pocket costs but a lower monthly premium may be a good choice if:

  • You can’t afford the higher monthly premiums for a plan with lower out-of-pocket costs;
  • You are in good health, rarely see a doctor, don’t play contact sports, and drive carefully or are hardly at all in a car.

Read the Fine Print to Review Coverage Details

Once you’ve narrowed down your options, make sure your chosen plan covers all of your needs. Read your plan’s Summary Of Benefits with a careful eye on the list of covered services. Some plans may include more comprehensive coverage for services like physical therapy, oral surgery, or mental health care, while others might charge lower copayments for prescription drugs or ER visits. If you cannot find reliable information about a particular plan online, call the customer service line of the insurers you’re considering and ask detailed questions. Buying individual health insurance is easier when you ask the right questions and get straight answers. 

You may want to ask this:

  • Is a particular medication and dosage covered under the plan?
  • Which birth control options are covered?
  • What is the plan’s service area, the geographic boundaries where I can find all of the plan’s in-network providers and hospitals?
  • What coverage is available if I get sick when traveling outside the United States?
  • What is the plan’s referral procedure? You may want to rule out plans that require a referral every time you want to see a specialist.
  • What do I need to do to sign up, and when will my coverage begin?

Some insurers have awesome websites and mobile apps for self-service. If you prefer looking online rather than phoning for information, lean toward companies with comprehensive and easy-to-navigate websites. 

Buying Individual Health Insurance: A Checklist

Buying individual health insurance does not have to be complicated. You can simply begin shopping by going online or contacting an agent or broker. The choice to purchase a plan on the ACA Marketplace mostly depends upon whether you qualify for premium tax credits or perhaps even cost-sharing government subsidies. 

Various online tools, such as HealthCare.com’s plan comparison tool, can help you compare your plan options side by side, healthcare.com.

Consider your healthcare needs and any budgetary constraints. Check ACA income requirements to see if you qualify for cost assistance. Also, consider short-term plans if you don’t qualify for government assistance, are healthy, want low monthly premiums, and are willing to accept benefit limits and the risk of big unexpected bills.

When you’re shopping for individual health insurance, eliminate options with limited provider networks that exclude your favorite doctors or all but a few local specialists or hospitals.

Determine whether you’ll come out ahead if you pay a higher monthly premium to get more substantial coverage, as compared to buying a plan with a lower premium but higher out-of-pocket treatment costs.

Once you have selected a plan, apply for coverage and complete any necessary enrollment steps. And note the date when your coverage kicks in, so you know when you can begin to reap the benefits of solid health insurance.

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