On your own in the health insurance market

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Securing coverage: It's nasty out there

Protecting yourself from medical emergencies on your own means venturing out into the inclement world of the individual insurance market

By ALBERT CRENSHAW

The Washington Post

WASHINGTON — Health care insurance is key to a family’s financial security, perhaps second only to a paycheck. For the vast majority of workers, medical coverage comes through an employer. But more employers, particularly smaller ones, say it is too expensive to provide health insurance for workers. As a result, a growing number of Americans are faced with buying coverage for themselves.

The insurance industry argues that most people who want policies can get them and that they will be adequate. Critics, however, contend that many people either are rejected for coverage or can’t afford it, and that those who do get a policy may find its protections very limited.

Although about 18 million Americans do buy insurance on their own, nearly 47 million have no insurance at all. (The rest are covered through their employers or under a government program such as Medicare for the elderly or Medicaid for the poor.)

At issue is what is called the individual medical insurance market. This is insurance bought one policy at a time from commercial carriers, and it differs in many important respects from the group market in which employers provide coverage to their workers and, with declining frequency, to retirees.

First, much of the group market involves companies, typically big ones, that insure themselves. In simplest terms, these employers agree to pay their employees’ health-care costs themselves and hire another company,

often an insurer, to administer the claims. Self-insured health care plans are regulated by a federal law, the Employee Retirement Income Security Act of 1974.

The individual market is regulated by the states, so requirements on insurers, consumer protections and policy offerings vary widely.

When individuals leave group plans, parts of two other federal laws may come into play: the Comprehensive Omnibus Budget Reconciliation Act of 1986, and the Health Insurance Portability and Accountability Act of 1996, known by their acronyms, COBRA and HIPAA.

Despite all those laws, millions of Americans cannot get insurance, either because they can't afford it or because they are rejected by carriers as too sick to insure.

Nonetheless, because a severe illness or injury can result in hundreds of thousands of dollars in medical bills, middle-class and even well-to-do families who do not have coverage through an employer need to try to get whatever protection they can.

If you don’t have an employer plan:

The first step is to begin educating yourself about the health insurance market in your state. A good place to start is a Web site run by the Georgetown University Health Policy Institute, www.healthinsuranceinfo.net. Click on your state, and you can get summary information on consumer protections and what private insurers may and may not do.

Then think about what kind of insurance you need. In general, experts say, you should focus on protecting yourself against ruinous medical expenses and worry less about having your routine expenses paid.

“It’s better to buy comprehensive benefits with a high deductible as opposed to first-dollar (coverage) with limited benefits,” said Karen Pollitz, research professor at Georgetown’s Health Policy Institute.

You should also look for a policy that is renewable at your option. Many people, especially young adults expecting to take a job soon, buy temporary policies for, say, six months, figuring that’s all the coverage they’ll need. But this a risk.

“The problem with temporary policies is that they are temporary,” Pollitz said. “If you get a job, fine, but if you don’t, you are forced to renew. If you’ve had no claims, you can renew. . . . But it’s a six-month policy, and if you get hurt after four months, it pays the bills for two months. Then it’s not renewed . . . ”

You should also look carefully at internal caps and limits the policy may have. What is the lifetime maximum the policy will pay? “Ideally there should be no limit, but $2 million should be the absolute rock bottom to accept," said Nancy Metcalf of Consumers Union. "Anything lower and you're really putting yourself at risk."

But then there is the question of the premium. To get a sense of the range for someone in your situation and your state, the Web site eHealthInsurance.com offers a range of price quotations, and you can get details on policies.

You may want to consider an "HSA-compatible" policy, which has high deductibles but allows you to put aside an equal amount in a tax-deductible, health-savings account that is tax-free if used for medical expenses. Such plans work best if you are healthy — no chronic ailments, for example — and in good enough financial shape to fund the HSA account.

In addition, Consumers Union's Web site includes a worksheet for policy comparisons. That one's at consumersunion.org; click on "health care" at the bottom, then on "health insurance," then "individual policies," and finally on "Consumer Reports: Plan cost and coverage worksheet."

Finally, if you find a policy that looks good, will the insurer sell it to you? In most states, that's up to the insurer. "The medically underwritten market can be very difficult to enter," said Pollitz.

Different carriers have different rules, of course, so shopping around may get you over this hurdle. But perhaps not. If you're refused coverage, ask your state insurance regulator if there are companies offering "guaranteed-issue" policies for which you can't be turned down. Such policies tend to be very expensive.

There are really only two surefire solutions in today's individual market, said Metcalf: "Be healthy or be rich."

If you have an employer’s plan but are leaving the company:

People leaving a workplace group-insurance plan have some options that others in the individual market do not. First, under the Comprehensive Omnibus Budget Reconciliation Act of 1986, which applies to workers at companies with 20 or more employees, you have the right to continue on your employer’s plan for up to 18 months, and in some cases longer. This means you can keep the coverage you had and don’t need to worry about being turned down because of illness or a “pre-existing condition.”

The hitch is that you no longer pay just the employee share that you probably had to cover when you were on the job. Now you’ll have to pay the entire premium and perhaps a 2 percent administrative fee allowed by the law. The amount can top $1,000 a month for a family, based on the average cost to employers of nearly $12,000 per employee for health insurance last year. It’s not surprising that only about 20 percent of workers eligible for COBRA coverage take it.

However, if you had a good plan at work, experts said, it’s likely to be better than anything you can get in the individual market. Sign up “if you can possibly swing it, especially if you have a pre-existing condition,” said Nancy Metcalf of Consumers Union. Not only do you get the coverage you are used to, but it also "preserves your right to buy insurance" in the individual market when your COBRA benefit runs out, she said.

Continuing with COBRA makes you "HIPAA-eligible" when you enter the individual market. The Health Insurance Portability and Accountability Act of 1996 requires states to have at least two policies available without pre-existing condition exclusions.

If a state doesn't have those two policies available, then it must set up an assigned risk pool, which is an arrangement under which insurers in the state share the coverage for people unable to buy a policy on the open market. However, HIPAA doesn't regulate what the carriers of the policies can charge, though some states do.

Finally, when considering COBRA and HIPAA, remember deadlines. You have a right under the law to COBRA benefits, but you lose that right if you fail to exercise it within 60 days of the termination of your group coverage. You have 63 days from the expiration of COBRA coverage to apply for HIPAA-eligible coverage.

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