Buy Health Insurance: How to Shop for a Plan

COBRA, as you probably know, is the law that lets you and your family buy health insurance at a group rate from your former plan for up to 18 months if you lose your job and its health benefits. If you qualify for COBRA, sign up, and then start shopping for a new policy that will take effect when your coverage ends. If you lost your job involuntarily between September 1, 2008 and March 31, 2010, you’ll pay only 35 percent of your COBRA premiums for up to 15 months.

Although COBRA’s group rates are typically lower than the cost of buying coverage on your own, a policy is still likely to be pricey, especially for family coverage. To save money, you might want to keep COBRA coverage for yourself and find a more economical option for your kids.

When you’re looking for a health insurance policy today, your choices and costs will depend on the state you live in and your health. For example, unless you’re a resident of Maine, Massachusetts, New Jersey, New York, or Vermont, insurers can currently reject you, charge you more, or exclude coverage for specific health issues. In Los Angeles, having a kidney stone within three months of applying for a policy could make you an “automatic decline,” says agent Bill Foudy.

Work with a local insurance agent who can tell you about state rules and policies that may affect you. To find an agent, get a referral from your doctor, friends, or family members, or visit ehealthinsurance.com or vimo.com. Both sites have knowledgeable agents you can call. If no insurer will take you, your state may have a high-risk pool that must. Healthinsurance.org has links to all of the state-run pools.

When you begin shopping for a policy, look for these features:

• Premiums you can afford. As with other types of insurance, the higher your deductible (your out-of-pocket cost), the lower your premium. So, although a low deductible may sound enticing, your premium payments could be stratospheric. A 59-year-old Indianapolis man who doesn’t smoke might pay more than $900 a month for a plan with a low $500 deductible.
• Annual out-of pocket limit. This annual maximum amount is key, says Eliza Navarro Bangit, who recently left Georgetown’s Health Policy Institute for the government health agency, because it includes not just your deductible but co-pays for prescriptions and co-insurance costs for doctor visits. Look for an out-of-pocket maximum of $6,000 for an individual and about $12,000 for a family.
• No coverage ceilings on key health costs. Specifically: Avoid upper limits on hospital and outpatient medical treatment, visits to doctors, drugs, and diagnostic imaging tests.
• Uncapped annual benefits. Some health insurance policies cap annual benefits at $100,000. But that’s not high enough if you get really ill, says Bangit. Under the health-reform law, “unreasonable” limits will be eliminated this year; all yearly limits will be gone by 2014.
• Lifetime benefits that are unlimited or capped at no less than $2 million. The standard $1 million cap isn’t enough. The new law will eliminate lifetime benefit caps by October.
• Coverage of everything “medically necessary” for a problem. Even with this language in a policy, assume that any services that aren’t listed aren’t covered. To guard against absurd exclusions, scrutinize the legally binding contract, called the “EOC” (Evidence of Coverage). Insurers and agents may say it is available only after purchase, but insist. And if this doesn’t work and you have specific concerns, ask your agent — and have him or her put any promises in writing, advises Nancy Metcalf at Consumer Reports.

For a blue-chip plan, go with a high-deductible policy that qualifies you to open an HSA (Health Savings Account). That’s a bank account where your tax-deductible deposits pay for medical expenses and earn interest, tax-free. Insurers say these high-deductible plans cost them less, so they can charge lower premiums. You’re a good candidate for the high-deductible/HSA combo if you’re young, healthy, and can deposit more cash than you expect to spend on medical expenses. Mississippi agent Larry Fortenberry says a high-deductible policy can lower your premiums by at least 25 percent.

In 2010, federal law allows individuals and families to put up to $3,050 and $6,150, respectively, into their HSAs. The maximum out-of-pocket expense for the year, including deductibles, is $5,950 and $11,900 for individuals and families, respectively. The minimum deductible to qualify for an HSA is $1,200 or $2,400, respectively, but plans commonly offer deductibles of $5,000 or $10,000.

Plan to build up your HSA to the annual out-of-pocket maximum within a couple of years, says Micah Porter, a planner at Minerva Planning Group in Atlanta.

You’ll want to stay in-network as much as possible, since only health services by providers within the plan’s network count towards your deductible.

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