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Small Business Employee Benefits and HR Blog

What Is Individual Health Insurance?

July 29, 2014
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Individual health insurance is a policy purchased by an individual for themselves and their family based upon personal needs and budget -- just like car insurance.

While traditional, job-based health insurance may be more familiar to most people, it is not the only option. In fact, due to changes with health reform, more people than ever before are enrolling in individual health insurance policies.

Why Choose Individual Health Insurance?

There are many new benefits with individual health insurance, including:

  • Portability: Employees may keep their policy when they switch jobs

  • Choice: Employees choose the policy that best fits their needs, including the network of providers and level of coverage

  • Savings: Individual health insurance costs less, and employees may be eligible for a premium tax credit to assist them with the cost of their monthly health insurance premiums

  • Coverage: Individual health insurance covers all essential health benefits, and is available to everyone regardless of pre-existing medical conditions

For more on the advantages of individual health insurance, see this quick reference guide.

How Do You Buy Individual Health Insurance?

Policies can be purchased through a licensed health insurance agent or through the Health Insurance Marketplace. Purchasing an individual health insurance policy has never been easier. There are four simple steps to follow:

  1. Contact a health insurance broker or your state's Individual Health Insurance Marketplace website (see this directory of Marketplace websites)

  2. Complete the online or paper application with basic personal information; financial information is only needed to qualify for a premium tax credit

  3. Select a policy based on the desired coverage level, or "metallic tier" (see below)metalic_tiers

  4. Pay the premium (aside from the portion that is covered through a premium tax credit)

For more on how to buy individual insurance, see this infographic.

How Do Premium Tax Credits Work?

Premium tax credits (aka "premium subsidies”) are available for policies purchased through the Health Insurance Marketplaces run by each state.

One is eligible for the premium tax credits if they meet income requirements and do not have access to affordable coverage through work or the government.

  • Income Requirements: Families who earn up to 400% of the Federal Poverty Line (FPL) may be eligible for premium tax credits. For example, an individual earning up to $46,680 in 2014 would be eligible for a premium tax credit, while a family of four earning up to $95,400 in 2014 would be eligible

  • Individuals who have access to affordable, minimum coverage through work (or a spouse's work) or through a government program such as CHIP or Medicaid are not eligible for a premium tax credit

For more details on premium tax credits, see this guide.

How Can Employers Help?

Employers can provide their employees with a valued health benefit, while offering all of the benefits and flexibility that individual health insurance policies offer by:

  • Not offering traditional, job-based health insurance. Just offering job-based health insurance disqualifies employees (and often their families) from premium tax credits

  • Implementing a defined contribution health plan to reimburse employees for individual health insurance premiums

Read more: Using Defined Contribution to Reimburse for Individual Health Insurance Costs

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