From the recently laid-off worker to the entrepreneur whose start-up isn’t large enough for group coverage, more and more people are turning to the individual health insurance market. In Michigan alone, as many as 500,000 people are insured with individual policies.
“This is not a new phenomenon,” says Ray Sohn, director of the Individual Market at Priority Health. “The individual market has been growing considerably over the last four or five years, and it provides another option for access to the health care arena.”
Smart Business spoke with Sohn about the options that are available for consumers in the individual health care market.
What options are there for exiting employees?
COBRA allows those who leave employment to continue to receive health coverage for generally up to 18 months, or until they become entitled to other coverage. COBRA participants are required to pay the premium cost that the employer was providing for them during their employment. Also, if your health coverage ends because you are no longer a group member, you may be able to continue group coverage through group conversion or through the individual health care market.
What is group conversion?
Group conversion is a contract offered to employees who are coming off of their group coverage. If they elect to exercise it, they can automatically get a group conversion contract on a guaranteed issue basis. They do have to pay the premium, but it gives them a relatively easy transition. They don’t have to shop around and are able to stay with the same insurance company. Group conversion provides a bridge to these individuals’ next policy. At some point, they would find a new employer, start their own business or select a different individual market option.
Sometimes people look at the benefit design of group conversion contracts and elect to look at the individual market, because group conversion contracts often are not as rich in benefits as another individual plan they could purchase.
Why is the individual health plan market growing?
The days of working for the same corporation for 35 years and obtaining a retirement plan are over. We’re seeing the retooling of various industries. Also, many people are starting businesses or becoming independent consultants. That movement and change have dictated a demand for individual health care products. The new health care reform legislation seems to indicate that the individual market will continue to grow, as well. The individual health plan market is a very prominent space for health plans, especially in Michigan, and you’re starting to see more options in that particular market.
What should people who are considering starting their own businesses know about the individual health care market?
They should know that there are a wide range of benefit design choices to fit their price point. Also, in many cases, it is more affordable than people think. They should look to the individual market to secure coverage for themselves and their families. If they aren’t sure what to do, agents are an excellent source of guidance and information. The Web is a great source for independent research.
What types of individual plans are available?
One size does not fit all, and the individual marketplace reflects that. Individuals can mix and match to build a plan to meet their own needs and price point.
One option is family-type plans, with various coinsurance and deductible options. While the benefits don’t tend to be as rich as those of employer-sponsored plans, health plans from a reputable health carrier usually cover preventive services and comprehensive coverage if you get sick. In addition, some benefit plans include accident benefits and have optional riders for coverage that is more predictable, such as maternity care.
Because consumers don’t all enter the individual market at the same time, people looking to buy individual coverage should look for health plans that have deductibles that start when they join, rather than only in January of each year. Because more and more people choose high deductible plans, this is a very important feature.
There are also plans designed to appeal to the ‘young invincible’ market generally individuals ages 18 to 30. For these people, health insurance doesn’t really enter their minds. Rather, the purchase of health insurance might be driven by their parents.
The plans for the ‘young invincible’ market would be considered more catastrophic in nature. They would not have as many bells and whistles and first-dollar-type benefits because the utilization in that marketplace is so low. But they provide peace of mind in the event of a more serious health condition or accident.
The price point of a quality plan that covers physician, hospital and pharmacy costs is usually $100 per month or lower. These individuals want good coverage, but a lot of times they are not in their higher income-producing years, so affordability is obviously a big item, as well. But consumers should be wary of prices that are too good to be true. In many instances, they are, and they won’t find out until they really need the coverage then all the fine print comes into play.
Why are individual health plans an important tool in the health care arena?
Individual plans provide an option to those who either elect not to go with COBRA or those who don’t have coverage options through a group plan. Instead, they can enroll in an individual plan that will provide quality coverage, perhaps not at the same benefit level, but at a very good benefit level for a much-reduced price tag. Much as we all purchase auto insurance to protect ourselves and other motorists, maintaining a standard of health insurance benefits the greater community by helping to keep costs affordable.
Ray Sohn is director of the Individual Market at Priority Health. Reach him at email@example.com or (248) 324-2795.