Although most Americans get their medical insurance from an employer or from the government, individual health insurance is designed for people who are self employed or who do not have access to an employer-sponsored or government health plan. Historically, individual insurance in almost all states has involved medical underwriting, which meant that securing a policy could be difficult for people with pre-existing conditions.
Most health insurance companies are for-profit entities (and even non-profit carriers cannot operate at a loss). They have to take in more money in premiums than they pay out for medical claims. In the individual market, medical underwriting has traditionally been the way they accomplish this. People with pre-existing conditions can be declined for coverage, or offered a policy with an increased premium or an exclusion riders that eliminates coverage for pre-existing conditions.
But all of this changed in 2014
The ACA made individual health insurance guaranteed issue as of January 2014. This means that medical history is no longer a factor in determining whether an applicant can get a policy, or how much the policy will cost. Individual health insurance is issued with modified community rating, which means that premiums will vary based on geographical area, age and tobacco use. But increased initial rates based on medical history are longer be allowed, nor are pre-existing condition exclusion riders. And nobody will be declined for coverage based on a pre-existing condition.
Until the end of 2013, healthy applicants could still apply for underwritten individual plans. Many carriers allowed insureds to keep these plans until their renewal date in 2014, which have been a good option for people who didn’t qualify for subsidies in the exchanges and preferred to keep an underwritten, lower-priced plan for as long as possible.
Health insurance is a necessity, and it’s also now required by law.
All but the most wealthy among us need health insurance to protect against bankruptcy in the event of a serious illness or injury, and to secure access to expensive life-saving medical care if we need it. Although lawmakers saw that removing medical underwriting from the individual health insurance market was necessary in order to extend coverage to everyone, they also knew that this had the potential to create significant adverse selection in the market. There was just too much potential for people to wait to apply for a policy until they needed medical care, knowing that the coverage would be guaranteed issue.
So the ACA includes two provisions to prevent this: With very few exceptions, everyone is now required to have health insurance or pay a penalty. And individual health insurance is only available for purchase during open enrollment windows. Open enrollment is from October 15th to December 7th each year.
Outside of the open enrollment window, individual policies will only be available for people who have a qualifying event (birth, adoption, divorce, mariage, or loss of other coverage).
What can you expect?
Individual health insurance is available both in and out of the exchanges. You can purchase health insurance through a trusted broker, directly through a carrier, or via your state’s exchange.
The first thing to do is figure out if you qualify for a premium subsidy or cost-sharing subsidy based on your household income. If you do, you’ll definitely want to get your health insurance through the exchange, because that’s the only way the subsidies are available.
Individual ACA-compliant plans are rated with “metal” designations, which helps consumers compare apples to apples. There is plenty of variation from one carrier to another, both in terms of plan design and price, but policies are labeled based on their actuarial value, or the percentage of costs that the plan covers before the out-of-pocket maximum is reached.
Bronze plans will cover roughly 60 percent of costs, Silver plans 70 percent, Gold plans 80 percent, and Platinum plans 90 percent. For people under age 30 or those with income-based hardship qualifications, catastrophic plans are also available.
All plans are subject to out-of-pocket maximums which cannot exceed $6,350 for an individual or $12,700 for a family in 2014. Cost-sharing subsidies are only available on Silver plans. Premium subsidies for eligible applicants can be applied to any of the “metal” plans.