A. Consumer Guide To Individual Health Insurance

B. Consumer Guide To Health Savings Accounts (HSAs)


A. Consumer Guide To Individual Health Insurance

What is individual health insurance?

Individual health insurance is coverage that a person buys independently. It can be sold to a single individual, to a parent and dependent children, or to a family. The majority of Americans get their health insurance coverage through an employer or through a government program, but five percent of the population purchases private health coverage on an individual basis. Each state separately regulates how individual policies may be marketed and sold.

How can I buy individual health insurance coverage?

In almost every state, individual health insurance coverage can be purchased through licensed health insurance salespeople known as agents or brokers. Independent agents and brokers sell insurance plans from many companies, and they can help you find the coverage that best suits your individual needs.

Agents and brokers also provide service on the policies they have sold, and can help you process claims or with anything else you need regarding your policy. The insurance companies for which agents and brokers sell coverage pay them a commission for their work, so you will not be charged a direct fee if you want to use the services of an agent or broker. You can find agents and brokers who sell individual coverage via the Internet, or you may prefer to consult with one in person. To find an NAHU member near you who can help you purchase individual insurance coverage, use our agent locator.

How is individual insurance different from group insurance?

Individual health insurance is very different than group health insurance, which is the type of insurance that is offered through an employer. Since laws mandating what types of services must be included in individual policies are often different than those dictating what must be included in group policies, benefits are generally less extensive than what most people would receive through coverage they have through work. Individual consumers may be surprised to learn that some benefits that may be considered “standard' in a group policy, like maternity coverage or substance-abuse treatment, may not be included in an individual plan. Sometimes individual health insurance consumers have the option to pay extra for coverage of additional services like maternity coverage. This extra coverage is referred to as an optional rider.

Cost is often the primary factor for individual health insurance consumers, which is another reason why the benefits included in individual policies are often simpler. In addition, deductibles (the amount you have to pay before insurance benefits begin) and cost-sharing (the fees you pay directly to medical providers at the time of service) are also generally higher.

Individual health insurance companies are much more limited than group insurance companies in their ability to spread risk, so the laws concerning i ndividual health insurance are different in most states. This means that applicants for individual insurance will need to complete a brief medical questionnaire when applying for benefits and, unlike a group insurance policy, in most states a company can decide not to cover people with very serious medical conditions (e.g., HIV or cancer), deeming them “uninsurable.”

How are premium rates determined?

In the vast majority of states, when you apply for individual health insurance coverage, you are asked to provide health information about yourself and any family members to be covered. When determining rates, insurance companies use the medical information on these applications. Sometimes they will request additional information from an applicant's physician or ask the applicants for clarification.

If the insurance company is unable to obtain information necessary to accurately determine the risk of a particular applicant, it will underwrite more conservatively, meaning that the assumption relative to the missing information will be negative rather than positive.

Example: A person has a history of high blood pressure, but it is controlled with medication and he is not overweight. If the company is unable to determine if that individual smokes or if he has normal cholesterol, the company will assume that the missing information is negative and rate accordingly.

Once the company has determined your health status, you will be assigned a rate class by the company and put into a pool of other insured individuals with similar health status. Your premium will be the rate charged to that entire class of customers. Subsequent annual renewal premium rates will be determined not by your individual claims, but instead by the claims experience of the entire rating class pool.

Are any pre-existing medical conditions covered?

Even though in almost every state an individual insurance company can choose not to offer coverage to people with serious medical conditions, most Americans don't have perfect medical histories and most still qualify for individual coverage. However, there are some individuals who do not decide to purchase health insurance coverage until they know that they have a medical problem that will require the use of benefits. This is known as “adverse selection,” and it can be a serious problem for individual market insurance companies since their ability to spread risk is so limited.

To help prevent adverse selection, insurance companies are allowed to look back at your medical history for pre-existing conditions and may choose not to cover certain conditions for a specified period of time. This is known as an exclusionary, or pre-existing condition, waiting period. The amount of time an insurance company can look back at your medical history, and the length of time an exclusionary period can last, vary on a state-by-state basis. NAHU's Health Care Coverage Options Database will tell you what the requirements are in your state.

In some states, you can receive credit against a pre-existing condition waiting period if you have had prior health insurance coverage within a specified number of days. The amount of the credit against the waiting period is generally proportional to the length of the prior coverage.

Also, many states allow health insurance companies to issue elimination riders to people who have pre-existing medical conditions. Elimination riders allow for insurance companies to offer an individual with preexisting condition coverage but exclude coverage of that condition.

Example: An individual has severe seasonal allergies but can control them with medication. A company may offer the applicant two policy options: a policy at a more expensive rate with full allergy coverage and a pre-existing condition waiting period, or a cheaper policy with no waiting period that excludes allergy coverage. The individual may find that it is more affordable to buy the cheaper policy and pay for his allergy medication out-of-pocket.

Can I still buy individual insurance if I have a very serious pre-existing medical condition?

In most states you can be turned down for individual coverage if you have a very serious medical condition (e.g., HIV or cancer). Fortunately, even though they are not required to do so, most states have developed some way to provide uninsurable people with access to individual health insurance coverage. Thirty-three states provide coverage to medically uninsurable people through high-risk pools. Twelve states use other means of providing uninsurable people with access to individual coverage (e.g., requiring that all individual health insurance companies issue individual policies regardless of health status, coverage through a designated health insurance company of last resort, etc.). There are five states that still have no means of providing individual health insurance access to people with catastrophic medical conditions. To find out what your state's options are for medically uninsurable individuals, check out our Health Care Coverage Options Database.

Since each state sets its own requirements for individual health insurance policies, how can I find out what the requirements are in my state?

To find out about each state's specific requirements regarding individual health insurance policies, please see NAHU's Health Care Coverage Options Database. The database also contains contact information for the state regulators of individual health insurance policies to use if you have questions or concerns.

B. Consumer Guide To Health Savings Accounts (HSAs)

What is a Health Savings Account (HSA)?

Health Savings Accounts (HSAs) are a new way for consumers to pay for medical expenses. As of January 1, 2004, almost anyone with a qualified high-deductible health plan can also have a Health Savings Account. HSAs can save you money on your medical care now as well as provide a good way to save for future medical expenses. HSA funds can pay for expenses before you meet your deductible as well as helps pay for services not covered by your health plan, COBRA coverage during periods of unemployment, medical expenses after retirement and long-term care expenses, to name just a few.

Your high-deductible health plan can be one you get through your employer or a policy you buy on your own. Even if you get your high-deductible health plan or even your HSA account through your employer, you own your account. You decide how much to contribute, how much of the account to use for medical expenses, and which medical expenses to pay from your account. You also choose whether to pay for medical expenses from the account or save it for future use. Even if you change jobs, your Health Savings Account is still yours.

You can keep the account even if you move to another state, and you can continue to keep it as you grow older. Regardless of where you get your health insurance plan, whether on your own or through your employer, your Health Savings Account funds are yours.

Unlike some other types of accounts, you don't lose HSA funds at the end of the year. Unspent balances remain in your account earning interest until you spend them on medical care. This will be a strong incentive for you to spend wisely on your medical care, just like you do on other items you purchase. You'll want to shop around for the best value for your health care dollars.

For detailed information on Health Savings Accounts (HSAs), please click here.

Q&A tri-fold on HSAs published by Treasury Department

A Primer on Health Savings Accounts for Consumers

Questions and Answers About Health Savings Accounts (HSAs)

How Can I Find an Agent To Establish a Health Savings Account?

You can call your current insurance company to see if your current health insurance policy qualifies to be used with a Health Savings Account. A licensed health insurance agent can help you with this process. To find an agent in your area, click here.

What Insurers Are Offering Qualified High-Deductible Health Plans That Can Be Used With a Health Savings Account (HSA)?

What If I Have a Qualified High-Deductible Health Plan But My Insurer Doesn't Offer the Health Savings Account Itself?

AN HSA can be established through a qualified trustee or custodian who is different than your high-deductible health plan insurer. A trustee can be an insurance company or bank or any institution already approved to administer Medical Savings Accounts (MSAs) or IRAs. Other trustees may be approved by the Treasury Department if they follow the procedures established.