How to buy your own health coverage

Buying private medical insurance is no picnic, but group benefits aren't an option for everyone. Here's what you need to know to shop for an individual health policy.
As companies cut expenses and more entrepreneurs strike out on their own, the individual health insurance market is growing.
"There's been a precipitous drop in the number of businesses offering coverage," says Sam Gibbs, the senior vice president of ehealthinsurance, an online insurance broker.
These days, the same people who traded company pension plans for self-managed 401(k)s are being asked to take on one more chore that used to be handled by human resources: shopping, selecting and purchasing And it can be daunting.
Plowing through the process
Rob Snow put it off for more than a year. When he left a successful online company at age 39 to start Snow Portfolio Management in Bethesda, Md., he took advantage of COBRA, or the Consolidated Omnibus Budget Reconciliation Act , which allowed him to remain on his old company's group plan as long as he paid the premiums. But that privilege extends only for 18 months. And he was nearing the end of it. (For more, see "Know your COBRA rights.")
So, one weekend, Snow sat down at his computer and searched for "health insurance" -- and got a million hits. "I probably spent an entire day scrolling through those," he says. "I got worn out. I probably didn't do anything for three weeks."
But Snow eventually went back to the computer and zeroed in on a few sites that allowed him to get quotes or compare policies.
His pick was a regular preferred provider organization, or PPO, plan with a high deductible that allowed the family to keep their doctors -- one of his wife's must-haves. "There's no way she was ever going to change pediatricians," he says. And the monthly premiums were $603, a savings of as much as $435 per month for their family of five.
"One of the reasons I probably saved as much as I did was that we're all, thankfully, pretty healthy," Snow says.
Not surprisingly, when you're buying health insurance, your health is a key factor.
"The healthy individual out there buying insurance does not have that much trouble," says Sandy Praeger, Kansas' insurance commissioner and the 2008 president of the National Association of Insurance Commissioners . But for people with health issues or pre-existing conditions, "it can be tough, if not impossible, to find coverage in the individual market."
And then there's shopping for policies. For people who've never had to do it themselves, "there is the perception that you make a call or two and you've got it," says Jerry Flanagan, the health care policy director for consumer watchdog , an advocacy group. "You have to do a lot of research, know what you're getting and buy it before you cancel your (current) coverage.
"The individual market is a very difficult place for consumers to find affordable care with good coverage," Flanagan says.
Key insurance questions
If you're purchasing your own health coverage, there are three big issues:
• Can you get coverage?
• Can you afford the premiums?
• Does it cover what you need covered?

When do you need it, and when can you do without?
With group policies, insurance companies have to cover anyone the company hires. But with individual policies, carriers are free to cherry-pick customers.
"In most states, companies can charge you more or deny coverage for pre-existing conditions," Flanagan says. But in a handful of states, they can't. Get the details from your state insurance department so that you know what to expect.
And sometimes the exclusions or limitations don't even concern a current condition. If you're a woman of childbearing age, you could face a large deductible on anything related to maternity care.
In the face of exclusions or less-than-perfect health, "I think what a lot of people are opting for are scaled-back plans," Praeger says. Policies may not cover certain areas, such as mental health services, maternity care or drugs. And they may limit the number of times you can see a doctor or have certain screenings.
How to start shopping
One of the biggest hurdles for consumers who are used to having group coverage at work is just starting the search.
If you're buying, you need to find out who's selling. The best way to do that is to get a referral from someone you trust. Or, go to your state insurance department's Web site for a list of licensed companies and brokers who sell health insurance in your area. The state site will also have information about complaints (including complaint ratios) that paint a picture of which companies are giving the best service.
Many states offer a "buyer's guide" to walk you through the process and will provide cost comparisons from different types of policies, Praeger says.
Also, you can find local agents of the National Association of Health Underwriters through the group's Website.
Then take some time to consider what you want in a policy, Flanagan says. What's your target premium? What kind of deductible and co-pay? What's the scope of service you need (exclusions, screenings, annual checkups, etc.)?
After that, thoroughly search the Internet. Visit sites that offer quotes to see what kind of coverage you're offered and at what price. Compare not just different carriers but different types of plans with the same carrier.
As you compile information, keep a chart, Flanagan says. Jot down each company's name, its premium, what it covers and what it doesn't, along with any outstanding benefits or drawbacks.
Ask questions:
• What are all the restrictions with this policy? If you're not happy with the answers, tell your agent the type of coverage you want and have him shop it.
• Are your doctors and their hospitals included in the plan, including the closest hospital? "If they aren't, are you willing to make a change for a lower price?" says Praeger.
• Is unnecessary coverage included in the plan? "If you're a 22-year-old male, you don't need maternity benefits," eHealthInsurance's Gibbs says. "You'd be surprised" how companies bundle coverage, he says.
• Does the carrier have a policy limitation on how often it raises its rates? That low premium you're quoted "might change twice in the first year," says Flanagan.
• How long has the carrier been licensed in your state, and is the license current?
"Consumers really have to arm themselves before they get insurance," Flanagan says.
Finding an agent
Independent agents will represent more than one company, so you can cover more ground with one call.
However, not all independent agents are bias-free, Flanagan warns. Some may receive incentives to push certain policies or may get commissions from carriers, he says. So be prepared to make some more calls (and do some extra research on your own) to make sure you're truly being offered the best deal, he says.
A good independent agent will know who is serving people with your health or lifestyle profile, Gibbs says.
Consider value, not just cost
With insurance, everyone knows to shop deductibles. But with health insurance, you also want to look at the total payout for an illness and also for the life of the policy.
Be suspicious of premiums that seem too low. Make sure you're aware of the details with policies that give you lower premiums in exchange for limits on the number of times you may see a doctor or the number of hospital or lab-related services you're allowed.
And beware of discount plans, Praeger says. Many are "out-and-out fraud."
Take care with the application
Once you've narrowed your choices to a few options, check the carriers' financial solvency at A.M. Best. You also want to follow up and make sure each company has a good reputation with customers.
When you finally do select the winner, fill out the application carefully. "That application will look very different from what (an applicant) filled out for their employer" under group coverage, Flanagan says. It will be more complicated and lengthy.
Keep your answers honest, and be prepared to produce copies of your medical records. Review any information the broker is sending on your behalf, and make sure it's accurate. If you have questions, call the company and get explanations.
Don't cancel any current health policies until you've been accepted into a new plan, the check has cleared, and you've reached the "effective date" (starting date) of your new policy.
This article was reported and written by Dana Dratch for Bankrate.com.