Individual Insurance; 2021

What is the state of the individual insurance market? Not good from where I sit as an active insurance broker. Let me explain. Since Obamacare came into existence, the individual market has done through a metamorphosis from offering very good coverage with low deductibles and low maximums out of pocket. Today most plans have high deductibles and high maximum out of  pocket.

Before ObamaCare a male under 30 could get a $1,000 deductible with a $3,000 maximum out of pocket for under $80 per month. Today, that policy with its low deductible and low maximum out of pocket is unavailable and has been replaced by a $6,500 deductible and an $8,550 maximum out of pocket with premiums in the $400 per month range. The traditional PPO plan (Preferred Provider Organization) is no longer available in the individual marketplace. It has been replaced by an EPO (Elite Provider Organization). 

The difference between a PPO and an EPO is significant.  They use the same network of doctors. However, with an EPO you cannot go out of state or county to seek medical services unless it is urgent or an emergency. The PPO allows you to go out of state for medical services without it being urgent or emergency but the new EPO, does not allow it. If you do go out of state and it is not an urgent or emergency, you pay the entire bill.

So, any individual seeking health insurance is subject to these high deductibles, high maximums out of pocket and anything with a low deductible and maximum out of pocket costs almost as much as a 2nd mortgage.

If you need coverage and cannot afford the high monthly premiums, but you need health insurance for you and your family. Here’s my suggestion on how to afford insurance without breaking the bank. I am referring to individual coverage so if you are working and your employer offers group coverage, take it. There are a couple of options, but no one is advertising them to the extent they should as it is a public service.

The first option is to see if you qualify for a subsidy from the government to help pay for part of your insurance premium. Call a broker and ask them what the income levels are to see if you qualify for a subsidy. There are charts available based on number of members in your household and your family income. Essentially, your family income needs to be above Medicaid levels which is 100-138% above the poverty level based again on income and number of family members. Above 150% of the poverty level gets you decent coverage at very low monthly premiums. So, seeking help from the broker community helps you obtain the coverage you need at no cost to you.  The broker’s compensation is paid directly from the insurance carriers. And no, calling the insurance company direct does not reduce your premiums, it just makes the insurance company more money. 

If you are not eligible for a subsidy the broker can show you other plans that are available outside the exchange without any subsidy.

The main reason to use a broker is their knowledge of the market and that if they are appointed with all the insurance carriers you are going to get the best possible insurance for the lowest premium. These brokers have their disposal all the insurance carriers so they can search to find you the best plan. Usually, that is based on maintaining your current doctors and of course, that the insurance also covers any prescriptions you take. 

If you have determined that you are not eligible for a subsidy but still need insurance. Talk to a broker and explain your situation from a health and finance perspective. What the broker should do is figure out based on the information you gave them what is affordable to you. That narrows down the field of plans. Next have the broker review your doctors to make sure they are in the plan you are choosing and that your medications are available at reasonable prices. 

After all the information is digested, your broker should be able to offer you several options that fit your budget and has you doctors and medications available through the insurance.

Based on all the information provided and the state of the insurance industry, my recommendations are a little different from most brokers. I prefer you to have protection from a catastrophic health event instead of having low doctor cost visits. That leads me to an explanation that makes sense in this market. The higher the deductible and higher the maximum out of pocket means if a catastrophic health event happens, you are covered at 100% above the maximum out of pocket. Based on the cost of healthcare treatments isn’t it better to have coverage for something catastrophic rather than have a $30 copay for doctor visits?

The cost of the high deductible insurance plans is less than the ones with the lower deductibles and maximums out of pocket. It protects you from something catastrophic, so you don’t use up savings and must get a 2nd mortgage to pay your medical bills. These plans have much lower premiums and makes sense. 

Additionally, getting an HSA (Health Savings Account) type plan allows you to have a high deductible and maximum out of pocket while having lower monthly premiums. These plans do not have any fixed copays for services, so you pay the contracted rate the doctor or facility has with the insurance company. Federal law establishes these HSA type insurance but most people are unaware of their existence and how they can save you premiums dollars.

These HSA plans also allow you to put away money, pretax to pay the out-of-pocket medical costs. Unlike a Flexible Spending Account, you can get from an employer, these HSA plans your own completely and when you retire, that money is yours to use to pay your Medicare expenses. Having an HSA allows you to put money away pre-tax and use that money to pay your out-of-pocket medical expenses. You can even reduce your gross income by the amount you put into your HSA account. So, you win two ways: One, by reducing your gross income thus reducing your taxable income and two, by putting money aside to pay out-of-pocket medical expenses with pre-tax dollars. 

As discussed, the cost of health insurance keeps increasing each year and as a smart consumer you need to understand how to maximize your coverage while keeping the premiums affordable, not easy in today’s individual insurance market. Take the time necessary to consider all your alternatives before choosing your health insurance. Call a broker to help you figure out your best options.

Len Barend, broker, The Barend Agency Inc. 702-250-2200

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