In today's economy, many people are forced to enroll in an individual health insurance policy due to being unemployed or by being employed by a company that is unable to provide health insurance to its employees. You should consider yourself fortunate if you receive health coverage from your employer. Individual health coverage can be extremely expensive if you do not choose carefully. While you are more likely to pay higher out-of-pocket costs with an individual policy than with an employer-funded group plan, there are some effective ways to lower your costs. Here is a look at how you can save money when enrolling in an individual health insurance policy.
Just like with any other purchase, when purchasing health insurance you will want to shop around and compare various policies with a fine-tooth comb. Individual health insurance policies have different features and vary quite broadly from one another. In order to find the individual health insurance policy that best fits your needs, comparison shop and you can quickly see which health insurance policy is right for you.
HMO vs. PPO
The type of plan you choose could mean the difference between saving money and shelling out a lot more than you intended. There are several different types of individual health insurance policies available on the market. Just two of the options are PPO (Preferred Provider Organization), and HMO (Health Maintenance Organization). A PPO policy allows you greater flexibility with the doctors and hospitals you visit. However, you can expect to pay a higher out-of-pocket cost in terms of deductibles and premiums.
Alternatively, HMO policies frequently have a lower out-of pocket cost. However, with HMO policies, you will not have the same flexibility that a PPO plan would allow and it may only allow you to visit specific healthcare providers.
Higher Premium Often Means Lower Co-Payments
A common method of determining premiums of health insurance is if you pay a higher premium, your out-of-pocket costs, such as copays and deductibles, will be less. This is where you will need to weigh your options very carefully. If the consumer is in good health, he or she may want to consider a plan that has a low premium, since he or she does not to have many medical expenses throughout the contract year. However, if the consumer expects to have a considerable amount of medical costs throughout the year, he or she may want to consider a plan that offers a higher level of benefits.
Keep Your Eye Out for Additional Perks
Some individual policies have added benefits, such as prescription coverage programs to enhance a healthy lifestyle, such as dental coverage. Not all individual policies are created equal. When you are shopping around, don't just look at the basic services that the plan covers. Call the insurance carrier and ask if there are any added bonuses to enrolling with them as opposed to a competitor. You may be surprised by how much one insurance carrier offers vs. another.
SEE: Understanding Your Insurance Contract
Look Out for Age Branding and Pre-Existing Condition Clauses
Enrolling in an individual policy is much different than signing up for health coverage with an employer. Many individual policies are subject to age banding and pre-existing condition clauses that can cause plans to skyrocket. Prior to enrolling, ask a representative at the insurance company if your plan is subject to age banding or pre-existing condition clauses. Age banding is a method that insurance companies use to determine premium rates.
As patients age, their need for health insurance becomes greater than it was when they were young adults. Due to this fact, some insurance companies charge a higher rate for aging subscribers. Additionally, if you have a pre-existing condition, your health insurance carrier can employ a clause stating that it does not have to pay for charges related to pre-existing conditions for a specific amount of time. Play it safe, and get all of your information upfront about these costly features.
SEE: 5 Health Insurance Considerations
Beware of Hidden Costs
There can be other hidden costs with health insurance, such as co-insurance. Co-insurance is a percentage of the total bill that is the patient liability. Typically, there is a coinsurance limit or out-of-pocket maximum clause on most individual policies. However, if there is no maximum, patient costs can skyrocket. Be sure that you understand your health insurance policy before signing on the dotted lines. Most health insurance carriers will give potential subscribers a breakdown of patient liability should they need to seek medical care. Don't let your medical policy catch you off guard, review the information at great length before making a decision.
The Bottom Line
Enrolling in an individual health insurance policy can be quite expensive if you do not tread carefully. You can protect your wallet when enrolling in an individual health insurance policy by carefully comparing the features and prices of each individual policy, and selecting the one that best meets the needs of your family.