Some people cannot access job-based coverage because their employer does not offer it, or because they are self-employed. To obtain health insurance, they must go to an agent and purchase an individual policy. The laws and regulations governing individual policies are very different than those governing job-based coverage. As a general rule, individual policies do not offer anywhere near the benefits and protections one can enjoy through job-based coverage, although this varies based on the state where the policy is purchased.
When you compare the consumer protections available to people purchasing individual policies to those available to members of job-based health plans, you will see that there are significant . This is not to say that individual policies are horrible and that no one should ever buy one. For many Americans, individual health insurance coverage is a perfectly viable option. However, because the rules are different and there are fewer consumer protections, it is important for people buying individual policies to be "smart shoppers" who are aware of their rights and protections under the law.
Under individual policies, the following rules apply in most (but not all) states:
- Guaranteed issue - In most states, applicants can be turned down for coverage based on their health status.
- Guaranteed renewability - Your health insurance cannot be cancelled if you become sick.
- Limits on Pre-existing Conditions Exclusions - These limits vary widely depending on what state you live in. In some states, insurance companies can impose exclusion riders that completely eliminate coverage for pre-existing conditions for the entire life of the policy.
- Portability - Portability requirements vary by state. In some states, you get no credit for prior coverage and must wait out the entire pre-existing condition exclusion period.
- COBRA continuation coverage - COBRA only applies to job-based coverage.
To find out more about the specific laws which apply to individual policies in your state, be sure to visit Georgetown University's Healthinsuranceinfo.net. Georgetown's Health Policy Institute has written consumer guides with information specific to each state. This resource will be especially helpful to you if you have or are seeking individual coverage, because your rights and protections are very different depending on which state you live in.
Also, be sure to check out my article on Buying an Individual Health Insurance Policy for helpful insurance shopping hints and tips.
