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Weighing Insurance Options

Question:

Are there any advantages to individual policies?

Answer:

Most of the time, if you are given the opportunity to take part in a health insurance plan sponsored by an employer, you'd be wise to accept. But, as with any financial decision, it's prudent to take a serious look at your needs.

Buying your health insurance through an individual policy can give you some distinct advantages, but it comes with significant disadvantages as well. ("Individual," by the way, means the insurance policy is not connected with your employment. You can purchase an "individual" policy that covers your whole family.)

One advantage of individual health insurance is that you can choose the insuring company, the type of plan, and the coverage that you want or need. The cost of premiums and the level of services vary significantly between companies, and comparison-shopping will be to your advantage.

You'll find that individual plans offer the same options as group plans, including health maintenance organizations, preferred provider organizations, point-of-service plans, and traditional fee-for-service arrangements. Your budget, your preference as to a physician, and your history of using health care should all be factors as you decide which type of plan is best for you. You can tailor the coverage (deductibles, co-insurances, prescription coverage, etc.) to your particular needs.

But there are several significant disadvantages to an individual policy. You will probably be shocked at how expensive individual health insurance is for adults, when compared with employer-sponsored plans. And there are no guarantees that an insurer will take you. Unlike group plans, individual plans are medically underwritten, and the insurer can decline to insure you or attach exclusions to your policy. Your insurance company will take into account your past and present health and factor it into your premium as it sees fit.

There's strength in numbers when you're buying health insurance. Buying it through your employer can save you significantly on premiums. In an employer-sponsored health insurance plan, the employer participates in the cost, while with an individual health insurance policy you pay the full cost on your own.

Remember, though, to review your employer's contribution to the cost of coverage for your family. Your employer might not make a contribution for your dependent's coverage. If that is the case, you may be able to purchase an individual policy for your dependents, especially your children, for less than the cost of your employer-sponsored plan.

Depending on your group size and the regulations in the state you live in, you probably can't be denied coverage based on your past medical history. And leaving your job is usually not the headache it used to be. If you work for a company that has a health plan covering 20 or more employees, federal law (COBRA) requires that the plan offer continuation of coverage for you and your dependents for 18 months after your termination.

The disadvantages of employer-sponsored plans are subtle. You can be limited in your choice of coverage and sometimes your choice of hospitals or doctors as well. Insurance companies are increasingly using managed-care techniques to evaluate treatments and authorize hospital stays. If you don't comply with the rules of your company plan, your benefit payments may be lowered.

Large companies typically give you a choice of coverages and a choice of provider networks. Many smaller employers also offer group health insurance plans, but these tend to be less reliable. Rates typically rise each year, and therefore your cost rises also. The coverages and insurance companies often change frequently, which can inconvenience you when trying to process a claim.

But while you're trying to decide where to buy your health insurance, one rule is uppermost: Don't let your indecision lead to your going without any coverage at all. Where health insurance is concerned, any choice is better than no choice at all.