Insurance

Opting for Private Insurance
Source: Yahoo! Finance

For years, if an employer offered health insurance to a worker, the worker generally took it.

Now some workers are for the first time entertaining another option: private health insurance. Some employees, particularly those at smaller companies, are finding it is cheaper to get spouses and children covered by private policies than under their employers' plans.

A decade of inflation-topping health-care cost increases and the fact that employees are now picking up a larger slice of the bill through higher premiums and greater out-of -pocket expenses are behind the trend.

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"If you are healthy, there are powerful economic incentives to see if you can strike a better deal on your own," says Alwyn Cassil, a spokeswoman for the Center for Studying Health System Change.

According to a recent survey by the Kaiser Family Foundation and the Health Research and Educational Trust, 37% of employees who work in a company with three to 199 employees can expect to pay 50% or more of the premium for family coverage, compared with just 5% of employees at larger companies. With the average annual premium for family coverage now more than $12,000, employees at smaller companies can end up paying $504 or more a month. (Employees at small companies tend to contribute less on average toward premiums for individual coverage than their counterparts at large corporations.)

"It's hard to gauge how many people are opting out of employer-sponsored coverage," says Gary Claxton, a vice president at the Kaiser Family Foundation, a nonprofit focused on health-care issues, "but the numbers could increase if employees face further cost increases and are willing to take less-generous insurance coverage."

Ruth Coombs and her family illustrate the trend.

About three years ago, Ms. Coombs, now 51, a registered nurse from San Antonio, began reconsidering her family's health-insurance options after receiving the news that it would cost $700 a month, up from $632 a month, to cover her and her two stepchildren under her husband Gary's employer-sponsored plan.

First, Ms. Coombs, who doesn't receive any benefits from her employer, the Methodist Hospital System, because she's part of a nursing pool, went back to her employer to find out what benefits she would be eligible for if she became a permanent member of the staff. She was told she would have to take a $7-an-hour pay cut and contribute toward monthly insurance premiums -- and she would lose the flexible schedule she cherishes.

Because her husband's employer, a small architectural firm, pays his individual premium in full, she thought the family could get a better deal if he elected employee-only coverage and she purchased a private policy for herself and the two stepchildren.

She went shopping online and selected a plan with Assurant Inc. with a $5,000 deductible and 0% co-insurance for doctors and hospital expenses. The cost: $273 a month.

"We are healthy, and considering what we would be saving in premiums, I thought we would be better off," says Ms. Coombs. "We rarely go to the doctors, so we just need protection against a catastrophic medical event, such as a car crash or a cancer diagnosis."

Of the consumers using eHealth Inc.'s eHealthInsurance Services Inc., an online insurance broker, to purchase new policies, a growing number are in a similar situation to the Coombses, says Sam Gibbs, a senior vice president there. The others are "the young invincibles," he says, 22- to 32-year-olds who were previously uninsured.

Mr. Claxton says the trend could spill over to employees in low-wage jobs who work for larger employers. However, he doesn't expect skilled workers at large corporations to be affected, because it is in their companies' interest to offer generous health benefits to recruit and retain staff.

Proponents of private policies tout their relatively low monthly premiums. Typically, the cheapest policies are plans with the highest deductibles, expenses consumers must pay before their insurance kicks in. (Some plans allow a limited number of doctor's visits per year for a nominal fee outside of the deductible.)

Consumers can also avoid paying for benefits they don't need. For instance, young, single men have no need for maternity coverage.

In addition, private policies are portable; if you change jobs, you don't have to worry about losing coverage.

Purchasing a high-deductible health plan can make sense if you are young and healthy, especially if you open a health savings account, which enables you to pay for out-of- pocket medical expenses with pretax dollars.

However, there are a number of caveats. Private policies can turn out to be more costly because they cover fewer medical services and don't provide the same legal protections group policies do. Under federal law, in an employer-sponsored health plan you can't be denied coverage on medical grounds.

By contrast, in the majority of states, private policies can permanently exclude pre-existing conditions, such as high cholesterol, or deny you coverage for chronic illnesses, such as diabetes. If you get sick, your premiums could soar -- and switching to another insurer may not be an option because of your poorer health status.

"If you are sick you can hide in a group, but with a private policy you are on your own," says Karen Politz, a research professor at the Georgetown University Health Policy Institute. In addition, as you age, expect your rates to go up, even if you are in perfect health. Premiums tend to take a big jump when you turn 50.

If are thinking of purchasing a private policy, do your homework. Premiums vary widely by state. For instance, the average monthly premium for single policies ranged from $157 in California to $504 in New Jersey.

Be realistic. In most states, insurers take into account your health status. Are you in good enough shape?

Don't just go for the lowest premium; think about the coverage you need and whether your doctor is in-network.

Shop around. You can compare plans online at sites such as www.ehealthinsurance.com and www.healthinsurance.com or find a health-insurance broker at www.nahu.org.

Experts also advise calling your state insurance department to check that the insurer is licensed in the state where you live and to get information about any complaints.

And read the fine print. Coverage for certain services, such as annual physicals, may not immediately kick in.

In the summer of 2006, Ms. Coombs switched to a WellPoint Inc.'s UniCare plan with a $5,650 deductible and a $193 monthly premium, after Assurant raised the premium on her plan to $310 from $273. Since then, her premiums have increased twice and now stand at around $252 a month. Ms. Coombs crunched the numbers again and says it makes financial sense to stick with her current policy.

"It's not for everyone, but for now it's working for us," Ms. Coombs says.

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