Buy your own health plan

Check out prices on the Web. In most states, eHealthInsurance.com can give you immediate quotes from several companies, including many BlueCross/BlueShield plans, and can also spell out what benefits you'll get for the price. Another site, DigitalInsurance.com, lists prices for a different group of health-insurance companies. Both sites are most useful in competitive markets such as California, but won't help much in Maine and other restrictive states. Taking a peek at the sites may be worth your while, even if you're happy with your current plan.

Visit your state insurance department's Web site. You'll probably find a list of companies selling individual coverage in your state, including those that aren't handled by brokers. For example, many BlueCross/BlueShield plans -- often one of the few choices available in highly restrictive states -- prefer to deal directly with customers, or offer such low commissions that they aren't worth a broker's time. The insurance department may provide shopping tips for your state, as well as insurance-company complaint records.

Look into your state's insurance pool if you have been turned down for coverage because of your health. In Texas, for example, anyone who can't get coverage elsewhere must be covered by the high-risk pool, although prices can be steep. States with guaranteed coverage, such as New Jersey, don't have high-risk pools because regular health-insurance companies are required to cover everyone.

Consider taking advantage of federal COBRA legislation if you have left a company that provided group coverage. If your previous employer has 20 or more employees, the company is required by law to let you continue your group coverage for up to 18 months.

Some states have similar laws for smaller employers. You generally foot the entire bill yourself, plus up to 2% in administrative charges, which can increase your costs considerably.

COBRA coverage tends to be a good deal if you're in poor health or in a market with few choices, or you want to stick with your current doctors. But because group plans often have more bells and whistles than you'd buy yourself, you might find a better deal by shopping on your own.

Form your own small group if that's an option. Even for tiny groups, employer group policies are often subject to different rules, are more competitive and offer lower prices than individual policies.

In New Jersey you can form a group with as few as two employees, including yourself, as long as each employee works a minimum of 25 hours per week and you pay the employer's share of Social Security taxes for your workers. And group policies can cost 20% to 50% less than individual coverage, says Barbara Ziegler, a health-insurance agent in Brick, N.J.

In Washington, another state with few choices in individual health insurance, self-employed people can form a group of one and have a much wider selection with more competitive prices. But you have to submit tax forms that prove you really are a business.

Join an association that has group coverage. In some areas, such as Rochester, N.Y., the local chamber of commerce offers some of the best health-insurance options around, says Alan Ziegler, an employee-benefits consultant and broker.

Association plans tend to be more attractive in states such as New York that don't have many options for individuals. In states where there's more competition, they can end up being magnets for sick people, with spiraling prices. You may not have this option at all, because some state laws are so restrictive that it's "virtually impossible" for association plans to operate, says Jessica Waltman of the National Association of Health Underwriters.

If all else fails and you don't want to go without coverage, you may have to bite the bullet and get a job that offers health insurance as an employee benefit.

How your state stacks up

If you're on your own and in good health, you'll have the toughest time finding affordable coverage in New Jersey, New York or Vermont. Those states have guaranteed-issue laws that require insurers to cover anyone who applies, regardless of health or community rating -- which means that insurers have to charge everyone the same premiums. Such a combination adds up to little competition and high prices.

States with no guaranteed-issue laws or community rating (where affordable insurance is easier to come by): Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Kansas, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.

This article was reported and written by Kimberly Lankford of Kiplinger's Personal Finance Magazine.

Updated Sept. 9, 2008

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