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Buying Your Own Health Insurance

Updated on August 15, 2012

Millions of Americans have purchased their own health insurance. Fewer and fewer employers are offering it, and when they do it can be more expensive then you can get on your own. But if you are looking at buying health insurance for the first time, it can be very complicated and intimidating. Don't worry, I know some very smart people who have been frustrated by the process. The goal of this hub is to help make buying insurance a little bit simpler for you.

Types of Plans

The two major types of plans you will have to choose from are PPOs and HMOs. With an HMO, you have to start all your health care through your primary doctor. If your foot hurts and you want to go to a podiatrist, you still have to go to your primary care physician first to get a referal. That referal will be to a podiatrist within the HMOs network. In theory this helps keep the cost of HMOs lower, but in reality this isn't alwasy the case.

With a PPO you are free to go to whatever specialist you would like, so long as they are in the PPO's network. You can go to a specialist out of network, but it generally costs significiantly more. The problem here is that many specialists require a referal from a primary physician.

The difference between a PPO and an HMO isn't that great. Its not nearly as important as the difference between a high deductible and a low deductible

Low Deductible Plan

Low deductible health care plans are what people are most used to when they have plans at work. A low deductible means you only pay a small amount of your yearly heath care costs. If your deductible is $200, you will pay the first $200 of health care costs, then the insurance company will pick up the rest. You will likely also have some co-pays for doctor visits, which are not part of the deductible. With plans such as these, you will have to pay a high monthly premium. Often when people who are new to buying insurance see these prices, they then search for a high deductible plan.

High Deductible Plan

Under a high deductible health plan, you are responsible for paying a much larger amount of your medical costs for the year. If you have a deductible of $2,500, then you have to pay your first $2,500 worth of bills before the insurance company will kick in. So if you have an $1,800 bill, you are on the hook for all of it. It is only until you have spent over $2,500 that the insurance will kick in. Every year, the deductible resets at 0 and you have to start over again.

That is often more then someone new to private health insurance wants to be responsible for. However, the premiums for these plans are far lower then the premiums for the low deductible plans. Often times the premiums are 50% less or more. If you stay healthy all year, these plans can result in significant savings. If you have chronic problems and consistently rack up large bills, its not as clear which plan is best. It depends on your total out of pocket costs. For more analysis, check out this site.

Which Is Right For You?

For the majority of people a high deductible plan will result in LOWER yearly medical costs. The savings from the lower premium is usually greater then the increased out of pocket costs. And in addition, people with high deductibles tend to be more frugal with their health care costs since they will be paying a large portion of them. While you should never put off getting care if you need it, some people will put off a trip to the doctor for the sniffles if they know they have to pay for it.

If you think you can properly save every month towards your deductible, then these plans might be right for you. Look into an HSA as well for increased savings. However if you are just going to pay the low premium and hope you don't get sick, then the high deductible plans might not be a good bet. It can be very stressful to get a large bill you have to pay on top of a major illness you are recovering from. If you don't think you can save enough to cover the deductible in the first year or two, then you should consider the low deductible plan.

Often the young and healthy prefer the high deductible plans. They can often get individual plans for less then $50 a month, and will likely not have large medical costs for the year.

Can You Keep Your Doctor?

Well of course you can. That is if you buy a plan from a health care provider your doctor accepts. There are online resources, but the best way to know if your doctor accepts a plan you are considering is to call. They don't mind these sorts of calls, they get them everyday. Its the only way you can be sure.


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