As the co-owner of a graphic design business in San Diego, Calif., John O'Connell felt it prudent to offer his 30 employees a group insurance policy. He chose a large California health maintenance organization, Kaiser Permanente, as a provider and an expensive no-deductible plan as a policy. The monthly premium for a family was $922. Employees did not have the option of accepting a higher deductible in return for a lower premium.
Some workers had no choice but to sign up. Preexisting medical conditions ruled out the possibility of buying individual policies on their own. But O'Connell, 55, did opt out of his own firm's plan. He went instead to Ehealthinsurance.com, an Internet brokerage.
There he found several affordable individual policies to cover himself, his 42-year-old wife, Simone, and two children, ages 7 and 8. He chose a high-deductible ($7,000 a year) Blue Cross plan with a $326 monthly premium. The O'Connells coupled that with a Health Savings Account managed by Wells Fargo Health Benefit Services.
"This made a lot more sense for us because we are a healthy family," says O'Connell. He is insuring against catastrophic costs while using his monthly savings to build up a kitty for future health care needs. Besides spreading risk, an insurance policy gives the customer bargaining power, and O'Connell doesn't miss out there. He gets the lower, contracted rates negotiated by Blue Cross for doctor visits and prescriptions.
Millions of Americans are turning to individual policies, because they either are self-employed, have retired before they are Medicare eligible, have no other option or, like the the O'Connells, opt out of an employer-sponsored group plan that looks too expensive. The Kaiser Family Foundation estimates that 13 million people who are not Medicare eligible are buying health insurance directly. Aetna (nyse: AET - news - people ), Assurant Health, Blue Cross, Blue Shield, WellPoint (nyse: WLP - news - people ), UnitedHealthcare and Humana (nyse: HUM - news - people ) are now offering a wider range of individual plans than ever before.
Before shopping for a policy, figure out your family's medical coverage needs. Do you visit the doctor frequently? Do you need coverage for maternity care or preventive checkups for children? Do you have a specific doctor that you want to continue to see? Perhaps you need coverage only in case of an emergency or accident? "Consider how many times you visited the doctor in the last year, if you need prescription drugs or have any chronic health problems," says Ehealthinsurance Vice President Robert Hurley. "Putting a little thought into what you need from a health insurance plan will help you be more efficient as you review the plans available online."
A healthy nonsmoking 40-year-old male living in California might qualify for an individual policy with Health Net (nyse: HNT - news - people ) for $89 a month with a $1,500 deductible. Alternatively, he might choose to pay $282 a month for a policy offered by Kaiser Permanente that has a $500 deductible and somewhat different benefits. Online brokers include the Ehealthinsurance.com O'Connell used and NetQuote.com. You can also shop for policies online directly from an insurer, such as HumanaOne and Health Net.
Getting a quote online is easy: Just enter your ZIP code and your birth date and you will immediately see health insurance policies that are available where you live. Fill out a brief questionnaire and you will get preliminary quotes within a few seconds. An individual plan can take 1 to 30 days to be approved, depending on the health conditions that need to be evaluated. Anyone over 40 can expect the insurer to examine medical records before approving an application.
A family history with high risk factors does not play a part in health insurance rates (as it would with life insurance rates). Preexisting conditions do.
As a rule of thumb, plans with higher deductibles are more likely to accept people with preexisting conditions such as high cholesterol or hypertension. "These individuals have more financial skin in the game and will be more conscious how they use their plan dollars," says Tod Zacharias, head of strategy for HumanaOne, the individual health insurance division of Humana.
Once you qualify for a standard individual policy, you can't be terminated on account of a new medical condition. You will be hit with rate increases as you get older, but these are set by class, and you will not be singled out for a premium change. State law forbids insurers to deny a renewal unless the customer commits certain offenses, such as turning 65, exceeding the lifetime maximum coverage or failing to pay premiums.
Some health insurers let a policyholder move out of state and keep the policy. These include Humana, WellPoint and some Blue Cross and Blue Shield plans. The rate will likely be adjusted according to the state the policyholder moves to. However, some insurers offer full portability only if the policyholder moves to a state where the company writes business.
One advantage to having health insurance coverage that sticks with you is that your doctor stays with you, too, even if you change jobs. Individual policies also let you better match the health insurance product to your family's circumstances. "Best of all, you can buy separate plans that meet the specific needs of individual family members, sometimes saving hundreds of dollars a month," says Ehealthinsurance's Hurley. It might be less expensive to buy two policies--one for a family member with a preexisting condition, such as heart disease or diabetes--and another for the rest of the family.
