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An Introduction to Individual Insurance

How the Affordable Care Act changed individual insurance in 2014 is often poorly understood, especially by those who plan to transition to such coverage for the first time. Let’s be clear about the term “individual insurance.” Individual insurance is coverage that is not provided through an employer or union, a government program like Medicare or Medicaid, or COBRA. The individual is the decisionmaker and the purchaser when buying individual insurance which can also be sold to a couple or family.

Most Americans who have individual coverage today are eligible for advanced premium tax credits through an Affordable Care Act (ACA) Marketplace and must purchase coverage through a marketplace or exchange (marketplace and exchange are synonymous terms). Those who will not qualify for these subsidies may purchase coverage through the marketplace or directly from an insurance company. In many states, there are additional coverage options for those purchasing coverage “off exchange.” In our opinion, those who do not qualify for a subsidy should consider their options both on and off exchange because one of the most important factors in deciding on an option is the provider network of the plan. You buy individual insurance based on your state of residence.

Pre-existing conditions have not been allowed to be a factor in the purchase of individual insurance since ACA reforms took effect in 2014. This is the primary reason premiums have risen for individual insurance. Prior to 2014, in most states only healthy people qualified for individual insurance. Of course, because most people buying individual insurance qualify for financial assistance, the impact of increased premiums is primarily felt by those who do not qualify for a premium tax credit.

On November 1, 2021, healthcare.gov, the federal marketplace, and all the state marketplaces will open to enroll individuals for January 1, 2022. Even though the federal and many state marketplaces will remain open into 2022, you must enroll by December 15, 2021, for a January 1, 2022 effective date.

The options available to people looking to buy individual coverage who have enjoyed generous health insurance benefits through an employer, especially a large employer, can be disappointing. Often, health maintenance organizations with somewhat narrow networks and managed care rules are the only options available. In spite of what may disappoint in terms of products or networks, all individual coverage is comprehensive coverage in terms of benefits because the Affordable Care Act mandates coverage for ten essential benefits. However, note that deductibles can be very high.

Another frustration is that there are just too many options. We were hopeful when ACA reforms categorized plans into four metal tiers, platinum, gold, silver and bronze, that plan selection might be more manageable. The metal tier categorization refers to the actuarial value of a plan which in non-actuarial terms relates to the relative relationship between the plan premium and out-of-pocket exposure. A bronze plan has the lowest premium but the highest out-of-pocket exposure due to a relatively high deductible. A platinum plan has the highest premium but the lowest out-of-pocket exposure due to a relatively low deductible. And gold and silver are in-between.

With any purchase or selection of a health insurance product, one wants to maximize the “match” between a given plan and the doctors, hospitals and other providers one wants to continue seeing and to verify that one’s prescription drugs are on the plan formulary.

If you are subsidy-eligible, seek assistance from healthcare.gov or your state-based marketplace staff. If you are not, work with a reputable broker or insurance consultant. If you are already on individual coverage, be on the look-out for any correspondence from your insurer. Insurers can and do discontinue products from time to time in which case you often must re-enroll. Should you decide to shop on your own, start early in November and aim to have an application filed no later than the first week in December in order to optimize having your new insurance cards in hand as the new year begins.

As always, leave nothing to chance. Also, be very suspect of any unsolicited person who calls your home or cell. Please don’t ever provide your personal information to anyone whose identity you can’t verify.