Individual Health Insurance: What It Is & How It Works

Individual health insurance provides coverage for medical emergencies and unexpected illnesses, as well as ongoing medical care and often preventative check-ups. This is a crucial type of insurance coverage for people who aren’t covered by employer-sponsored insurance plans. 

If you’re a small business owner or self-employed, understanding individual health insurance is critical to getting adequate coverage that meets your specific needs. In this article, we'll take a closer look at individual health insurance options and guide you through the process of finding a plan that's right for you.

What Is Individual Health Insurance

Individual health insurance is an insurance plan purchased by an individual or family that covers the costs of medical services and care. It can provide coverage for hospital stays, doctor visits, emergency services, prescription drugs, preventive care, and more. Many policies also offer additional benefits such as vision and dental coverage.

This type of insurance is important if you don’t have coverage through an employer-sponsored plan. It can provide critical protection in the event of an unexpected illness or injury. And, depending on the plan you choose, it may also provide financial protection from high healthcare costs, including regular check-ups, preventative care, and prescription medications.

How Does Individual Health Insurance Work

Individual health insurance is a type of insurance policy that provides coverage for medical expenses incurred by individuals and their dependents. Individual health policies include a range of coverage options, such as doctor visits, hospital stays, diagnostic tests, and medications. 

When buying individual health insurance, a policyholder can choose from various levels of coverage options, including a range of premium levels, deductibles, copayments, and coinsurance. 

Some terms of note when shopping for individual health insurance include:

• Premium: The amount of money a policyholder pays each month for coverage.
• Deductible: The amount the policyholder must pay out of pocket before insurance begins paying for medical expenses. 
• Copayments: Fixed amounts that the policyholder pays for health services.
• Coinsurance: The percentage of medical expenses that the policyholder pays after the deductible is met. 

Unlike group health insurance, individual health insurance policies are selected and tailored to meet the specific needs of the policyholder. This means you have the flexibility to choose the level of coverage that best meets your healthcare needs and budget. You’ll pay a monthly premium for the policy, and in return, the insurance company assumes the cost of medical emergencies and other expensive medical care. Having this type of insurance can help you avoid the exorbitant cost of paying for medical expenses out-of-pocket.

Types of Health Insurance Plans

There are several types of individual health insurance plans, including:

Employer-Sponsored Health Plans

Employer-sponsored health plans are a type of coverage that employers provide to their employees with medical insurance as part of their benefits. These policies are typically offered through a group plan, which allows a large number of employees to benefit from the coverage at a lower cost. Employers and employees share the cost of the premiums, with the employer generally paying a higher percentage of the cost. 

Employer-sponsored plans can include a variety of healthcare services, such as preventive care, doctor visits, prescription drug coverage, and hospital stays. They often also provide access to healthcare networks that can help employees find quality care at a lower cost. Overall, employer-sponsored health plans can be a valuable benefit for employees, providing access to quality care and reducing the financial burden of healthcare expenses.

Individual Health Plans

Individual health plans are designed for people who are self-employed or do not have access to employer-provided healthcare. These plans provide coverage for basic medical services such as doctor visits, hospital stays, and prescription drugs. Some individual health plans may also offer additional coverage options such as dental, vision, or mental health services. 

The cost of individual health plans varies depending on the level of coverage chosen and the individual's age and health status. Deductibles and copays may also apply. When entering into an individual health plan, it is important to carefully review the coverage and associated costs to ensure that the plan meets one's specific healthcare needs and budget.

Family Health Plans

Family health plans are policies that help families ensure that they have access to comprehensive medical coverage at an affordable cost. Usually offered by larger employers or purchased through a health insurance marketplace, family plans typically cover the primary policyholder and their dependents, including spouses and children. These plans operate on a shared cost basis, with premiums and deductibles typically split between the policyholder and the employer. 

With family plans, families can select from a range of coverage options, including traditional fee-for-service plans, health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans. By choosing a family health plan, families can feel secure knowing that they are covered for preventative care, specialist visits, diagnostic tests, and surgeries, among other services. 

Medicare Plans

Medicare plans are government-run policies that provide health insurance to Americans 65 and older and younger people with certain disabilities. There are four types of Medicare plans available, each providing different coverage levels. 

Types of Medicare plans include:

• Medicare Part A: Hospital insurance, covering inpatient care and some skilled nursing facilities. 
• Medicare Part B: Covers doctor visits, laboratory tests, and outpatient care. 
• Medicare Part C: Also known as Medicare Advantage, Part C combines Parts A and B. 
• Medicare Part D: provides prescription drug coverage.

Medicare is available to seniors each year during an open enrollment period when applicants can choose their coverage type(s). Enrollment may also be available to individuals with a qualifying event, such as losing access to employer-sponsored coverage.

Fee-for-Service Plans

Fee-for-service healthcare plans are a type of health insurance that allows individuals to pay for health services as they use them. These plans are becoming increasingly popular because they offer a level of flexibility and control that other types of insurance plans do not. 

Fee-for-service plans work by giving individuals a set amount of money to spend on healthcare services annually. Whenever they need medical attention, they visit a provider and pay for the service out of pocket. The plan will then reimburse the individual at a set rate. While these plans do require more work on the part of the consumer, they offer more control over healthcare choices and can be financially beneficial for those who don't require frequent medical attention. 

Where to Buy Individual Health Insurance

Individual health insurance can be purchased online through a health insurance marketplace (such as Healthcare.gov), through an insurance broker, or directly from an insurance company. It is also available through state and federal marketplaces. 

The most common way to buy individual coverage is through an online marketplace – even if you do so with the help of a broker. Buying through a marketplace allows you to see all of the coverage options available, research in-network providers, and see if you qualify for premium assistance. 

You can enroll in an individual health insurance plan through the marketplace each year during open enrollment (specific dates vary each year) or if you have a qualifying event, such as losing access to employer-sponsored coverage.

How to Find Low-Cost Health Insurance

For many people, the cost of health insurance can be a significant financial burden. Fortunately, there are several tips that can help individuals to find low-cost health insurance. Here are some tips for finding low-cost health insurance:

1. Check out online marketplaces: In addition to Heathcare.gov, many states have their own private exchanges that help residents find affordable coverage. And, depending on your income level, you may be eligible for subsidies and other benefits that can help lower the cost of your insurance premium.

2. Consider a high-deductible health plan (HDHPs): HDHPs usually have lower premiums than standard plans but require a high deductible before insurance coverage kicks in. However, these plans can also make you eligible for a Health Savings Account (HSA), which allows you to save money each year through tax-deductible contributions, which can be used later to cover deductibles and other healthcare expenses.

3. Look for discounts: Some insurers offer discounts for subscribers of certain organizations or those who purchase coverage early in the enrollment period. Others may offer discounts or other savings for policyholders who schedule regular checkups and other preventative care.



4. Research your options: When shopping for coverage, take the time to compare different plans and coverage levels to find the one that best meets your needs at an affordable price.