What to Expect When You Expect to Get Screwed Anyway: Tips on Navigating the Individual Health Insurance Market

Whether your current employer doesn’t offer health insurance, your COBRA’s about to expire, or you’re self-employed, applying for individual health coverage can be a confusing and intimidating task. In this market, there’s no one to hold your hand or offer a standard policy with clear premiums set in stone for the upcoming year. No matter your individual circumstances, you must be prepared to invest significant time and energy in choosing an appropriate plan. I offer the following tips to help you achieve the best outcome:

•The individual healthcare coverage market is one big quagmire of choices. It pays to do substantial research, and nothing beats the internet. Ehealthinsurance.com allows you to compare multiple plans side by side with ballpark quotes based on your age, sex, smoking status, and geographic location. You can also apply on-line, which allows the tedious underwriting process to begin more quickly. If you enlist the help of an individual agent, keep in mind that they may not be very knowledgeable about the plans they sell, and they have a financial incentive to push specific plans regardless of their impact on your bottom line.

•You are your own best guide. Decide what your healthcare priorities are, and choose your plan accordingly. Conventional wisdom holds that you buy the most expensive coverage you can afford, and in general, the higher the monthly premium, the lower the deductible, co-pay, and coinsurance amounts. However, so-called traditional plans with low deductibles and co-pays that you may have enjoyed through an employer-sponsored group plan are falling by the wayside for individual policy holders. They’re incredibly expensive, and insurers often don’t want to take the risk that you’ll use (or abuse, in insurance speak) your health plan too much and cost them more than they’re collecting in premiums. Having a good grasp of your past healthcare expenditures and current health status is critical when choosing an individual plan. If you are young, rarely get sick, and cannot afford a large premium, a high deductible health plan (HDHP) with a health savings account (HSA) may be the better choice, whereas if you have a chronic condition or have children who need frequent check-ups and prescriptions, it makes more sense to pay the higher monthly premium in exchange for lower expenses. The bottom line is you have to run the numbers to see what works best for you and your family. Don’t just guess; it could cost you dearly.

•Know the network status of your current healthcare providers. If you want to stick with your providers, check their network status with your proposed plans before applying. Most insurers have websites where you can check network status, but it pays to contact providers directly as websites and/or printed materials are often outdated. Also, by speaking directly with a provider, you may find that s/he doesn’t plan to renew his or her contract. You certainly don’t want to find this out in retrospect. Also, check the status of hospitals and outpatient facilities in your area, including any ancillary providers that you may use on a routine basis, such as pharmacies, physical therapists, laboratory, and radiology facilities.

•Complete the application thoroughly and honestly. Be prepared to write a thesis. Now is not the time to fudge your height, weight, smoking, or drinking status. It’s also not the time to disregard instructions or become lax about recording every single health problem you’ve ever had in your entire life or every reason you’ve visited the doctor in the last ten years. It’s tedious, yes, but if you are lazy or sloppy in your answers, the insurers regard your sloth as fraud because they will compare your answers to medical records collected from every single provider you’ve ever seen, and if there are discrepancies, you are essentially deemed a liar. Furthermore, if you fail to disclose having seen some providers, the insurers may already have access to your records anyway through large electronic databases that track and hold medical information for just this purpose—underwriting people for individual healthcare coverage and life insurance policies. You’ll pay a stiff penalty for inattention to detail. You could be denied outright, which will make it harder for you to obtain coverage through another insurer, or worse, you could be approved, incur a bunch of claims and then have your coverage rescinded retroactively because the insurer starts checking further into your records and finds that you failed to disclose a pre-existing condition.

•Be prepared for multiple exclusions, pre-existing clauses, and a higher final quote. State laws vary on individual health coverage, but generally, these policies are not required to offer some services that are standard on group plans, such as mental health or maternity coverage. Some may offer the services through expensive riders that individuals must request upfront. Inevitably, the insurer will find some pre-existing condition, and you can expect a non-coverage clause of at least one year. Some insurers will waive the non-coverage period if a member can prove s/he had coverage for the prior 18 months with no gaps in coverage. Others will not. In any case, your premium quote will most likely be increase based on this pre-existing condition even though the condition will not be covered in the beginning or ever.

•Pick up the phone and read your mail in a timely fashion. Insurance companies will often outsource the data entry of your application, as well as the collection and analysis of your medical records. You may get a call to answer questions about the information on your application or for help in getting records from your providers. If you want the coverage decision process to flow as efficiently as possible, you must take these calls. The callers do identify themselves and will ask specific questions about your application, so you can feel assured it isn’t some random person mining your personal medical info. Also, when a decision is made, it’s communicated in written fashion, and the individual has a limited time period in which s/he can accept the terms of coverage and pay the assigned premium. If you’re one of those people who reads his or her mail every few weeks, you’ll want to change this habit immediately. If you fail to meet the insurer’s deadline, you could find yourself without coverage and having to start the underwriting process all over again.

I should also mention that if you receive a copy of your original application either on-line or in the mail, you should hold onto it for dear life. For one, you can refer to it if there are ever questions about its original content in the event a claim dispute arises. More importantly, if you ever need to reapply for individual coverage in the future, you will save yourself immeasurable time in recording your medical history on the new application. And, one final tip—Once you’re approved (hopefully), I recommend signing up for automatic bank draft of your monthly or quarterly premiums, so you can avoid any unintentional lapses in coverage due to snail mail snafus.