What Is Individual Health Insurance?

Health insurance covers medical expenses for illnesses, injuries and conditions. But, unlike a plan through an employer, individual health insurance is something you select and pay for on your own. So, what’s health insurance for and why do you need it?

•Because accidents or health problems can happen at any time

•Medical expenses can be high—they’re the number one cause of bankruptcy

•To gain access to a network of doctors and hospitals that have negotiated lower rates with insurance companies

•To pay and keep track of medical payments quickly and easily

•To safeguard your way of life and your family’s physical and financial wellbeing

Understanding Health Insurance Language

We know health insurance has its own language with different terms, like “deductibles,” “coinsurance” and “copayments.” Once you get a good grasp on some of these basic terms, you’ll see how simple health insurance can be. Let’s start by defining these terms:

Deductible: This is a set amount you have to pay toward your medical bills every year before your insurance company starts paying. It varies by plan and some plans have no deductible.

Premium: This is the amount you pay your health insurance company to keep your coverage active. Most people pay their premium monthly.

Coinsurance: This is the percentage of your medical bill you share with your insurance company after you’ve paid your deductible. Unless you have a policy with 100 percent coverage for everything, you have to pay a coinsurance amount. For example, if you have a $100 doctor’s bill and your plan covers 80 percent of it, your coinsurance amount due to the doctor’s office is 20 percent, or $20.

Copayment (or “Copay”): Your copayment, or copay, is the flat fee you pay every time you go to the doctor or fill a prescription. It’s usually a relatively small dollar amount. Copays do not count toward your deductible but do count toward your out of pocket max.

Out of Pocket Max: The most you pay during a policy period (usually one year) before your health insurance or plan starts to pay 100% for covered essential health benefits. This limit must include deductibles, coinsurance, copayments, or similar charges and any other expenditure required of an individual which is a qualified medical expense for the essential health benefits. This limit does not have to count premiums, balance billing amounts for non-network providers and other out-of-network cost-sharing, or spending for non-essential health benefits. The maximum out-of-pocket cost limit for any individual Marketplace plan for 2015 can be no more than $6,600 for an individual plan and $13,200 for a family plan.

Types of Insurance Plans

Understanding HMOs

An HMO gives you access to certain doctors and hospitals within its network. A network is made up of providers that have agreed to lower their rates for plan members and also meet quality standards. But unlike other insurance plan types, care is covered only if you see a provider within that HMO’s network. There are few opportunities to see a non-network provider. There are also typically more restrictions for coverage than other plans, such as allowing only a certain number of visits, tests or treatments.

Some other key points about HMOs:

•You’re required to select a primary care physician (PCP), who will determine what treatment you need.

•You will need a PCP referral to be covered when you see a specialist or have a special test done. •If you opt to see a doctor outside of an HMO network, there is no coverage, meaning you will have to pay the entire cost of medical services.

•Premiums are generally lower for HMO plans, and there is usually no deductible or a low one.

Understanding PPO Plans

PPO plans provide more flexibility when picking a doctor or hospital. They also feature a network of providers, but there are fewer restrictions on seeing non-network providers. In addition, your PPO insurance will pay if you see a non-network provider, although it may be at a lower rate. Here are some key features:

•You can see the doctor or specialist you’d like without having to see a PCP first.

•You can see a doctor or go to a hospital outside the network and you may be covered. However, your benefits will be better if you stay in the PPO network.

•Premiums tend to be higher, and it’s common for there to be a deductible.

Benefits of an HSA

When we talk about an HSA, we’re really talking about a type of tax-advantage savings account that is designed to work with an HSA-Compatible health insurance plan. These two products in an HSA—a savings account and a health insurance policy—work together to give you:

•Tax advantages

•Investment opportunities

•Potential funding for retirement

•Greater control over your healthcare dollars and decisions HSA-Compatible Health Insurance

The insurance piece of your HSA plan is an HSA-Compatible high-deductible health policy. (Not every policy with a high deductible is “HSA-Compatible.”) Some key facts about HSA-Compatible health policies:

•HSA-Compatible plans offer premium savings and considerable discounts for physician services and prescription drugs, in exchange for higher deductibles.

•Premiums are often lower than other types of health insurance because you are responsible for a higher deductible.

•This type of policy can help protect you and your family financially from major medical emergencies.

A Health Savings Account You put money into the savings account to help pay your deductible and other medical expenses. So it’s different from a traditional health insurance package because it adds a new self-funding option—an HSA savings product, which many banks and credit unions offer. Most financial institutions offer a variety of investment options for HSAs, including stocks, bonds, mutual funds and money market funds. With an HSA, you save in three ways:

1.The money you put in your HSA account is tax deductible.

2.Funds in your account grow tax-free.

3.You don’t pay taxes on withdrawals (providing they are used for qualified medical expenses).

In Network or Out-of-Network?

If you want to get the most out of your coverage for the least out-of-pocket cost, you should find a doctor in your plan’s network. Insurance companies negotiate better rates with doctors, hospitals and healthcare providers within their network, so staying in-network saves you money. Selecting a doctor that’s outside your plan’s network will end up costing you more because you’re likely to get less coverage and benefits and pay more out of your pocket for them. Choosing an in-network physician is also easier because his or her staff will handle the insurance paperwork for you, which is called processing a claim.

What is a Narrow Network?

A narrow network applies to any health insurance plan that limits the doctors and hospitals that are available to their beneficiaries. Generally plans do not cover medical services obtained out-of-network or they will charge higher copayments or higher coinsurance rates. Some plans have exceptions for medical services obtained out-of-network if they were related to emergencies.