Private Health Insurance

The individual health insurance market is growing with the proliferation of micro-businesses, entrepreneurs, and companies no longer offering health coverage to their employees.

These days, the same people who traded company pension plans for self-managed 401(k)s are now being asked to take on another chore that used to be handled by human resources: shopping, selecting and purchasing private health insurance.

If you're purchasing your own health coverage, there are three big issues.

With group policies, health insurance companies have to cover anyone the company hires. But with individual health plans, carriers have the freedom to cherry-pick customers.

And sometimes the exclusions or limitations don't even concern a current condition. If you're a woman of child-bearing age, you could face a large deductible on anything related to maternity coverage. In addition, Consumers buying their own coverage face another challenge that didn't exist when they were under the group umbrella -- being dropped.

Under a group policy, the insurance carrier has to cover everyone in the group. It can raise the rates on the group, but it can't just drop someone. With individual insurance, the carrier can do both.

And then there is rescission. Some consumers report that after making claims during or after an illness, their carriers reviewed their applications, falsely accused them of lying about health issues, and rescinded coverage, says Flanagan. Not only are the consumers suddenly without insurance, but carriers sometimes send them a bill for any claims that have already been paid.

If you're shopping, you need to know who's selling. Go to your state insurance department Web site for a list of licensed health insurance companies and brokers who sell health insurance in your area. The state site will also have information about complaints (including complaint ratios), that paint a picture of which companies are giving the best service.