Although most Americans get their coverage 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, prior to 2014, individual insurance in almost all states involved medical underwriting. That meant that securing a policy was often difficult for people with pre-existing conditions.
How Individual Insurance Works
Most health insurance companies are for-profit entities. But 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 was traditionally the way they accomplished this. People with pre-existing conditions could be declined for coverage, or offered a policy with an increased premium or exclusion riders, that eliminated coverage for pre-existing conditions.
The ACA made individual health insurance a 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 rates based on medical history are no longer allowed. Neither are pre-existing condition exclusion riders. And applicants can no longer be declined for coverage based on a pre-existing condition.
Until the end of 2013, healthy applicants could still apply for underwritten individual plans. Originally, those plans were scheduled to be replaced by ACA-compliant coverage as of the start of 2014. But the Obama Administration has allowed those transitional (grandmothered) plans to continue to renew until October 1, 2017, as long as they terminate by December 31, 2017. Not all states accepted the provision that allows grandmothered plans to remain in force. However, even in states that have allowed the renewal of grandmothered plans, some carriers have opted to end their grandmothered plans and replace them with ACA-compliant plans instead.
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. Health insurance also secures access to expensive, life-saving medical care. 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 a guaranteed issue.
So Obamacare 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 for 2017 will start on November 1, 2016 and continue until January 31, 2017.
Outside of the open enrollment window, individual policies are only available for people who have a qualifying event (such as birth, adoption, marriage, a permanent move, 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.
If you have additional questions, please give us a call to discuss your individual healthcare options.