How to buy your own health coverage

By Bankrate.com

As companies cut expenses and more entrepreneurs strike out on their own, the individual health insurance market is growing.

"There's been a precipitous drop in the number of businesses offering coverage," says Sam Gibbs, the senior vice president of eHealthInsurance, an online insurance broker. (Compare policies and get quotes on MSN Money.)

These days, the same people who traded company pension plans for self-managed 401(k)s are being asked to take on one more chore that used to be handled by human resources: shopping, selecting and purchasing health coverage. And it can be daunting.

Plowing through the process

Rob Snow put it off for more than a year. When he left a successful online company at age 39 to start Snow Portfolio Management in Bethesda, Md., he took advantage of COBRA, or the Consolidated Omnibus Budget Reconciliation Act, which allowed him to remain on his old company's group plan as long as he paid the premiums. But that privilege extends only for 18 months. And he was nearing the end of it. (For more, see "Know your COBRA rights.")

So, one weekend, Snow sat down at his computer and searched for "health insurance" -- and got a million hits. "I probably spent an entire day scrolling through those," he says. "I got worn out. I probably didn't do anything for three weeks."

But Snow eventually went back to the computer and zeroed in on a few sites that allowed him to get quotes or compare policies.

His pick was a regular preferred provider organization, or PPO, plan with a high deductible that allowed the family to keep their doctors -- one of his wife's must-haves. "There's no way she was ever going to change pediatricians," he says. And the monthly premiums were $603, a savings of as much as $435 per month for their family of five.

"One of the reasons I probably saved as much as I did was that we're all, thankfully, pretty healthy," Snow says.

Not surprisingly, when you're buying health insurance, your health is a key factor.

"The healthy individual out there buying insurance does not have that much trouble," says Sandy Praeger, Kansas' insurance commissioner and the 2008 president of the National Association of Insurance Commissioners. But for people with health issues or pre-existing conditions, "it can be tough, if not impossible, to find coverage in the individual market."

• Uninsured by choice? Are they nuts?

And then there's shopping for policies. For people who've never had to do it themselves, "there is the perception that you make a call or two and you've got it," says Jerry Flanagan, the health care policy director for Consumer Watchdog, an advocacy group. "You have to do a lot of research, know what you're getting and buy it before you cancel your (current) coverage.

"The individual market is a very difficult place for consumers to find affordable care with good coverage," Flanagan says.

Key insurance questions

If you're purchasing your own health coverage, there are three big issues:

• Can you get coverage?

• Can you afford the premiums?

• Does it cover what you need covered?

With group policies, insurance companies have to cover anyone the company hires. But with individual policies, carriers are free to cherry-pick customers.

"In most states, companies can charge you more or deny coverage for pre-existing conditions," Flanagan says. But in a handful of states, they can't. Get the details from your state insurance department so that you know what to expect.

And sometimes the exclusions or limitations don't even concern a current condition. If you're a woman of childbearing age, you could face a large deductible on anything related to maternity care.

• Women pay higher rates for private health insurance

In the face of exclusions or less-than-perfect health, "I think what a lot of people are opting for are scaled-back plans," Praeger says. Policies may not cover certain areas, such as mental health services, maternity care or drugs. And they may limit the number of times you can see a doctor or have certain screenings.

How to start shopping

One of the biggest hurdles for consumers who are used to having group coverage at work is just starting the search.

If you're buying, you need to find out who's selling. The best way to do that is to get a referral from someone you trust. Or, go to your state insurance department's Web site for a list of licensed companies and brokers who sell health insurance in your area. The state site will also have information about complaints (including complaint ratios) that paint a picture of which companies are giving the best service.

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