Going Solo With Health Insurance

With escalating medical costs and wider access to individual insurance, there's a mounting temptation to leave your employer health plan and find one on your own. Just look before you leap.

Premiums for employer-sponsored health insurance have jumped by double-digit percentages four years in a row, rising five times the rate of workers' earnings and five times the rate of inflation, according to the Kaiser Family Foundation and the Health Research and Education Trust, both nonprofit groups in Washington, D.C.

Average premiums for family coverage reached nearly $10,000 in 2004, up 59% since 2000, according to joint research by the groups. Workers contributed more than $220 a month toward those premiums, or about four times what they paid in 1988.

The National Coalition on Health Care, another nonprofit in Washington, projects the average premium for employer-sponsored family coverage to increase another 45% by 2006, with employees continuing to pay more for the premiums, for deductibles, and for co-payments.

Employer plans rule

Employers provide health insurance for two-thirds of all Americans younger than age 65 but, as costs skyrocket, individual plans for consumers are getting more notice. Long available for the self-employed, early retirees, and those between jobs, individual policies bought directly from insurance companies and not through employers or other groups now cover 16.5 million Americans younger than 65.

"What's happened in the last few years is the Internet's brought transparency to the marketplace," says Bob Hurley, vice president of eHealthInsurance, a national Internet-based insurance broker in Mountain View, Calif. "So that now consumers can go out and learn what's available, see what the pricing is, and actually know what the reality of the individual market is. And I think what some of them are finding is that the individual market is more affordable than what they had been hearing."

Also adding to the momentum for individual insurance are the new health savings accounts (HSAs), created by the federal government as a way to encourage consumers to be more directly responsible for health spending. The accounts are tax-advantaged savings vehicles similar to a 401(k) retirement account, that work in conjunction with an HSA-eligible health plan and pay for medical expenses before you reach your plan's deductible. A small but growing number of credit unions offer HSAs. Ask the staff at your credit union if it does.

Tailored insurance

Traditionally, buying health insurance through a group has been cheaper because collectively the group has more bargaining power than a single person and can spread costs among more payers. But group plans need to accommodate more situations, so they tend to be standardized, more one-size-fits-all. Individual plans sometimes can cut costs by more closely matching coverage to a person's expected needs.

"The beauty of going out and shopping is that consumers can find a plan that better meets their specific needs," Hurley says. "When you can tailor a health insurance plan to meet your specific needs, then you can get the right value for the dollar."

A study by eHealthInsurance and the Kaiser Family Foundation found that the average premium that families paid for an individual plan was $3,331 in 2003, while families with employer-based policies paid an average $9,068. Researchers noted that the difference in prices reflected less generous coverage from the individual insurance as well as the relatively younger ages of those buying the individual plans.

Watch your step

Leaving an employer plan and going solo with an individual policy may be wise for some people, but the variables are so great and the consequences so grave that experts advise careful scrutiny of your own circumstances before making the move.

"It's really a very personal decision to go through the papers and read the fine print and make sure that the things you need covered for your family are indeed covered through your employer or in the health insurance options that your employer is offering you," says Mohit Ghose. He's the director of public affairs at America's Health Insurance Plans, an association of insurers based in Washington, D.C. "Employees should look at all available options including their employer-sponsored benefit plan, first, in order to make sure that the services or benefits that they need will be covered for the coming year."

Fully understanding what you and your family need from health care is the most critical step.

"That's the No. 1 caution if you're going to try to do this. Go out and shop first, and make sure that you can get approved for coverage so that you don't experience any lapse in coverage," Hurley says. "You don't want to get into a situation where you dropped your group coverage and then you can't get approved for your individual coverage, and now you're uninsured. That just is not a good thing."

Consumers considering jumping from employer-sponsored insurance should shop hard for what's best for their families, says Bruce Abbe, vice-president of public affairs for the Minnesota-based national non-profit organization Communicating for Agriculture and the Self-Employed, an advocacy group known for supporting health care affordability and access issues for rural people.

"By all means, they should study this and know what their options are," Abbe says. "It's like with anything: Find out what the costs are, shop, and know what you're going to do because it's a huge cost."

Shopping assistance

Online sites such as eHealthInsurance.com and Insure.com can help. But because insurance regulations vary by state, one of your first calls should be to your state insurance commissioner.

"A good place always to check in with, regardless, in terms of making sure that the company you want to sign up with actually exists and has a good base and is licensed by your state is to check in with the state insurance commissioner's office," Ghose says. Do this "to make sure that you're not signing up for a fraudulent health plan that isn't there for you tomorrow."

And going solo doesn't mean you have to go it alone. Abbe says a licensed independent insurance professional can help. Your state insurance commissioner should be able to direct you. Also, you can locate someone near you through the Independent Insurance Agents & Brokers of America, a Washington-based professional group.

Insurance is all about taking calculated risks. Just don't let the drive to reduce health insurance costs jeopardize your ability to cover your family's health needs.

"It's very much a personal decision," Ghose says, of leaving an employer-sponsored plan to buy health coverage directly from an insurer. "I think it's a decision that needs to be made based on what you're looking for. So I wouldn't say one is better than the other. It just depends on the employer. And it depends on your needs."

Published February 21, 2005