Individual Health Insurance Options for Startups

Learn from our expert, Jonathan Pletzke, about some health insurance options for startups and home-based businesses.

Individual health insurance is sold to individuals and varies based on the laws of the state in which you reside. There are two main ways in which health insurance is sold to individuals. Directly, so that the individual owns the policy, and as part of an association group, where the individual gets a certificate of coverage and is part of an association group policy. In most cases, you’re not guaranteed to qualify for either type of health insurance, and even if you do, the rate is not guaranteed either. The exception is in Maine, Massachusetts, New Jersey, New York, Vermont, and a few special cases in other states.

What does it mean to own the policy?

In individual health insurance, owning the policy means that you have a more direct connection to the health insurer, and nobody but you or the insurer can change or drop coverage. In most states, it is very difficult for an insurer to drop coverage when they’ve sold an individual policy, so you’re generally guaranteed renewal every year.

If someone else, such as an employer, an association, or an employee leasing company owns the policy, then they may change or drop coverage as they see fit, while only providing notice of the change to you. In this case, you don’t have any rights to keep the policy, nor do you necessarily have rights to any conversion options to other insurance products.

How can I be guaranteed health insurance, and how is the rate determined?

In some states you’re guaranteed coverage, regardless of medical condition. This includes Maine, Massachusetts, New Jersey, New York, Vermont, for example. You’re guaranteed coverage and the rate is at a set level for everyone regardless of medical status.

In other states, you’ll pay more if you have a serious medical condition, use certain prescription medicines, or due to any other factor allowed by the state for the insurer to issue health insurance policies. As a rule of thumb, the healthier and younger you are, the better the chance of getting health insurance at a very good rate.

Can I get a better deal by joining an association?

The advice used to be to get into a group in order to get a better rate on health insurance. For a time, industry and local associations were offering health insurance as a perk of membership. A few offers can still be found, but they don’t give the same benefits as group health insurance from an employer, nor do they give you the comfort of owning the health insurance policy. Since they are not guaranteed issue and rates vary based on age and health status, your first choice might be to consider an individual policy.

Shopping for individual health insurance

Shopping for individual health insurance can be quite easy. You can get quotes on the internet, though you will have to dig to determine which plans are association group sold to individuals, and in which you would own the policy. You’ll want to work closely with a good health insurance agent licensed and in good standing in your state – it doesn’t cost anything extra to use an independent agent, and you’ll get more options, plus the agent can review your application before you submit it.

When shopping for individual health insurance, you’ll need to know the laws of your state, whether you or any family members have any medical conditions that might lead to a higher rate, and how much you can afford to pay – both in monthly premiums and in out-of-pocket expenses when seeking routine and unplanned medical care. You’ll want to check out the quality and size of each insurer, along with which doctors are in-network.

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