When it comes to shopping for health insurance, there’s a lot to think about. However, one of the most crucial factors for many people is the cost. If you’re in the market for an individual health insurance policy, you’ll want to understand how the price compares to other options and if there are ways to save money without compromising coverage.
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What You Should Know
An individual health insurance policy may be the best choice if you’re self-employed or don’t qualify for coverage under an employer group plan. It may also be more affordable than other options. For example, if you recently lost your job, you may be eligible for health insurance under the Consolidated Omnibus Budget Reconciliation Act (COBRA). This federal law allows workers and their families to continue receiving health benefits through their former employer. However, COBRA can be costly, typically requiring payment of up to 102% of premium costs.
It’s worth noting that some states require you to have health insurance, or else you may face a penalty when filing your state income tax return. So, it’s essential to stay informed about your state’s requirements.
Despite what the name suggests, you can buy an individual health insurance policy that covers your whole family, not just yourself.
The cost of your policy will depend on various factors, such as the type of plan you choose, the insurance company providing the plan, your location, and whether the policy is for you alone or your entire family. Other factors that can affect the cost include your age and whether you are a tobacco user.
What Is Individual Health Insurance?
Individual health insurance refers to coverage that you purchase for yourself and your family, independently of an employer or other group coverage. One option when buying an individual plan is major medical insurance, which covers a wide range of health services, from routine check-ups to care for chronic conditions. Under the Affordable Care Act (Obamacare), major health insurance must include essential health benefits, including preventive care, pregnancy and maternity care, emergency services, and hospitalization.
How Much Does Individual Health Insurance Cost?
While having access to comprehensive health insurance can give you peace of mind, it does come at a price. The average monthly premiums for individual health insurance plans in 2020 are as follows:
- Single, 27 years old: $388
- Family of four: $1,520
Keep in mind that different insurers charge different rates, so the actual cost will depend on the number of individuals covered, their ages, and whether or not they use tobacco products. Additionally, where you live can also impact the cost, with some states having higher rates than others. If you’re purchasing coverage through the Marketplace, the plan category, such as bronze, silver, gold, or platinum, will also affect the price.
To give you an example, let’s consider a 40-year-old man from Dallas who doesn’t use tobacco:
- $399.40 per month for a PPO silver plan with a $3,300 deductible from BlueCross BlueShield of Texas.
- $798.80 per month if he adds his 40-year-old wife, who doesn’t use tobacco.
- $1,276.96 per month if the couple adds their two children to the policy.
- $1,386.96 per month if the couple adds their two children to the policy and the wife uses tobacco—a $115.58 increase per month.
What Are the Specific Costs Involved?
There are several costs associated with individual health insurance that you may need to pay, depending on the type of policy you have. These costs include:
- Premium: The amount you pay monthly to your insurance company.
- Deductible: The out-of-pocket amount you must pay before your insurance starts covering expenses.
- Copay: A fixed dollar amount that you pay for certain services, such as doctor visits or prescriptions.
- Coinsurance: The percentage of covered health services that you are responsible for paying once you meet your deductible.
- Out-of-pocket maximum: The total amount you may have to pay for health care services within a specific plan year. Once you reach this limit, the plan covers your remaining eligible expenses.
In some cases, the responsibility for paying these costs falls on a single person. For example, a consumer may have a health care plan with a $1,000 deductible that costs $300 in monthly premiums. After meeting the deductible, they may have to pay $50 for a doctor’s visit and 30% of the cost of any lab services. However, there is a silver lining: the consumer knows that their total out-of-pocket costs will be capped by the out-of-pocket maximum in case of a serious illness or injury.
How Do You Choose a Plan That Fits Your Budget and Needs?
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To select the right plan, you need to consider your typical health care usage for yourself and your family. Ask yourself the following questions:
- How often do you usually visit the doctor? Is it just for an annual check-up or more frequently to manage a health condition?
- Do you expect higher-than-average health spending next year, or do you mainly anticipate using preventive care services?
- How many prescriptions do you take regularly?
- How many health care providers do you usually see?
- Do you or your family members have chronic health conditions?
- Has anyone in your family been diagnosed with COVID-19 in the last year?
- Have you postponed any health care services due to COVID-19?
Consider adding up your expenses from the previous year as a general guide. Remember to factor in all costs, not just premiums. For instance, a high-deductible plan could be advantageous if you’re relatively healthy and primarily need preventive care, as those services are usually covered at 100%. Such plans often have lower premiums. Conversely, if you have a chronic condition requiring extensive care, a plan with higher premiums but lower out-of-pocket costs might be more suitable.
How Can You Save Money on Health Insurance Costs?
If the cost of health insurance seems too high, there are ways to minimize expenses. Under Obamacare, you may qualify for a premium tax credit or subsidy if your income falls below a certain level. The amount of the subsidy depends on how your income compares to the federal poverty level.
Additionally, you can consider purchasing supplemental health insurance, which covers some out-of-pocket costs like deductibles and coinsurance. If you are self-employed and have a High Deductible Health Plan (HDHP), you can also open a Health Savings Account (HSA) or Medical Savings Account (MSA) to save pretax dollars for qualified medical expenses.
If you decide to purchase individual health insurance, you can do so through the Health Insurance Marketplace established by the Affordable Care Act. It’s designed to sell insurance plans to individuals and small businesses. Alternatively, you can buy insurance through a provider, broker, or health insurance agent. Before settling on a plan, make an honest assessment of your health needs and budget. Remember, saving money on premiums won’t be beneficial if the plan doesn’t cover the necessary health care services.
Don’t hesitate to seek help from a broker or exchange navigator when exploring your options. Healthcare is complicated, and it’s essential to rely on objective resources who are experts in the field. You don’t have to figure it all out on your own.