Who buys individual health insurance?
About 6 percent of people under age 65 are covered by an individual (or non-group) health plan. The individual health insurance market is sometimes referred to as a residual market. This is where people go to buy health insurance when they don't qualify for insurance under a group health plan, or when they aren't eligible for a public program such as Medicare or Medicaid.
Even though it isn't a large percentage of the overall market, people often need individual health insurance for themselves or their families when they work in jobs that don't offer health benefits, are between jobs, or when they are self- employed even if only for a period of time. In addition, people who retire before the age of 65 (when Medicare eligibility starts) may need individual health insurance. People who are divorced or widowed can end up in the individual insurance market, as do some young adults when they first become too old to be on their parents' policies.
What does individual health insurance cost?
The cost of individual health insurance currently varies enormously, depending on what the policy covers; the age, gender, and health status of the person buying it; and geographic location in which it is sold, among other things. Beginning in 2014, health plans will no longer be allowed to charge higher premiums based on gender or health status. The only factors by which health plans will be able to vary premiums will be age, tobacco use, family size, and geographic area.
Individual insurance coverage is more expensive than group health insurance. Individual policy premiums include the cost of marketing, broker commissions and other administrative costs associated with selling policies to one person at a time. By contrast, in group health plans and public programs, these costs are spread over large numbers of people. In addition, individual health plans don't enjoy the same employer subsidies and tax benefits as group health plans.
What does individual health insurance cover?
Individual health insurance is often much less comprehensive than group health plans, with higher deductibles and co-payments covering fewer benefits. For example, insurance for prescription drugs and mental health care may be restricted.
Beginning in 2014, the Affordable Care Act (ACA) will require all new individual health plans to cover an essential benefits package designed to mirror the typical employer-based health plan. The plan must include, at a minimum:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
The ACA also requires plans offering the essential health benefits package to limit the cost-sharing they charge. Specifically, plans providing essential benefits will be prohibited from imposing an annual cost-sharing ceiling that exceeds the limits that apply to high deductible plans. Currently, those limits are $5,950 per year for individuals and $11,900 per year for families.
How is individual health insurance sold?
Currently, individual health insurance is almost always sold by brokers, and is medically underwritten. However, the ACA will change the way health insurance is marketed and sold. The ACA will create a web portal to allow consumers to shop for and compare plans, and creates health insurance Exchanges that will provide a "one-stop-shop" for enrollment in private or public insurance.