Buying health insurance can be intimidating when you’re not under an employer’s umbrella. The various types of health insurance plans, the wide range of costs, and the numerous ways to research and buy a policy can make the process daunting at first.
Here’s a guide to help you sort through the basics to find the plan that’s right for both your budget and your health needs.
What Is Individual Health Insurance?
The term “individual health insurance” is a little confusing. In most cases it means a policy purchased by an individual. But individual insurance also includes family coverage. Depending on your situation, you could be buying an individual health care plan that covers just you, or your spouse and dependents as well.
Young adults aging out of coverage under their parents’ plan may also need to buy individual health insurance.
You may find yourself shopping for private health insurance for you and your family if you no longer have employer-based insurance.
💡 Quick Tip: Your insurance needs depend on your age, dependents, assets, possessions, and economic situation. As your circumstances change, so should your insurance plans.
Types of Individual Health Insurance Plans
When you start your search for health insurance, prepare for alphabet soup — HMO, PPO, HDHP. Individual insurance comes in a lot of forms.
Choosing the right coverage for you starts with determining which type of plan best meets your needs. Here’s a quick look at the different types of health plans available and who might benefit most from each.
HMO plans limit coverage to health care providers who are under contract with the health maintenance organization. You usually need to have a referral from your primary care doctor to receive care from a specialist or other provider in the HMO network.
Care from providers out of the HMO network is typically not covered, except in the case of an emergency and for routine services with an obstetrician/gynecologist. HMO coverage is usually confined to specific geographic areas.
Some insurers offer a similar setup called exclusive provider organization plans, with coverage only if you use doctors, specialists, or hospitals in the plan’s network, with the exception of emergencies.
May be best for: People looking for the lowest-cost plans, who don’t need coverage outside their geographic area, and who don’t mind changing doctors to stay in the HMO network.
Members of preferred provider organization (PPO) plans pay less when they use network providers. Care outside the network is covered but at an additional cost. No referrals are necessary.
Some insurers offer a similar type of plan called point of service. As with a PPO, plan members pay less for care from network providers, but they are free to go outside the network. Like an HMO, they must use a network primary care doctor and get a referral to see a specialist.
May be best for: Individuals who can afford higher premiums and perhaps higher out-of-pocket costs in return for the freedom to see specialists and other providers outside the network.
High-Deductible Health Plan
This is a health plan that charges a deductible of $1,400 or more for an individual or $2,800 or more for a family for 2022. A deductible is the amount you pay out of pocket for health care costs before insurance coverage kicks in.
In return for higher deductibles, these plans usually charge significantly lower premiums. (Preventive care is usually covered at 100% when you stay in the network.)
You can combine a high-deductible health plan with a tax-advantaged health savings account. Contributions to an HSA are tax-free and can be used to pay for qualified medical expenses.
May be best for: People who don’t use a lot of health care services and are willing to risk high out-of-pocket costs, and those who are looking to start an HSA to save for future health care expenses.
Recommended: Benefits of a Health Savings Account
These low-premium, very-high-deductible health plans are designed, as the name implies, to cover only dire circumstances.
The plans cover the essential benefits defined by the Affordable Care Act, though there may be limits on preventive care and the number of covered visits to a primary care provider.
Deductibles are, well, high: in 2023, $9,100 for an individual, according to healthinsurance.org.
The plans will help if you become seriously ill or are injured, but you’ll pay out of pocket for many other health care costs.
Catastrophic plans are only available to people under age 30 and to people with a hardship or affordability exemption. They can be purchased on healthcare.gov or directly from carriers.
May be best for: People in between coverage plans looking for a short-term buffer against large medical bills should an accident or serious illness occur. These plans are generally not viewed as suitable for anyone looking for traditional health care coverage.
Short-Term Health Insurance
Short-term plans are designed to provide temporary emergency coverage when you are between health plans or outside enrollment periods. Depending on what state you live in, short-term coverage can last up to 12 months, sometimes with the possibility of renewal for up to 36 months.
Short-term plans are not compliant with the Affordable Care Act and therefore do not have to provide essential coverage such as preventive, maternity, and mental health care and treatment for preexisting conditions.
Deductibles and out-of-pocket costs can be significantly higher than those of traditional health plans.
May be best for: Like catastrophic insurance, this is generally considered suitable only for people looking for stopgap coverage while they are otherwise uninsured.
Recommended: Beginner’s Guide to Health Insurance
Choosing an Individual Health Plan
It’s best to consider a number of factors beyond the premium price to determine the most affordable choice that meets your needs.
Consider how you typically use health care: Are you generally healthy and only need to go to the doctor for annual physicals? Or are you treating a chronic condition that requires consistent care?
It might be a good idea to try to project what the coming year will look like in terms of how you use health care. From there you can take into account what’s most important to you, including costs, providers, and pharmaceutical coverage.
Some questions to possibly ask as you compare plans:
What would my cost-sharing be? This includes out-of-pocket costs such as deductibles, copays, and coinsurance.
Does the plan have an annual or lifetime limit on how much I’d spend out of pocket? Every plan that is ACA compliant must publish a summary of benefits and coverage that you can check to see how the plan covers costs. In addition, most insurers and health care organizations have online tools that can help you compare plan costs.
Are my doctors in the plan’s network? You can check with the insurers or directly with your providers. If your providers are not in the network of the least expensive plans, ask yourself what is most important to you: lower costs and changing doctors or higher costs and keeping current providers.
Are my medications covered? Most plans have a formulary, a list of drugs that are fully or partly covered under the plan. You can access the plan’s formulary on the insurers’ websites. The lists change from year to year.
An experienced agent or broker who sells plans that are on the Health Insurance Marketplace and off the exchange can help you compare the broad range of plans to determine which one is right for your needs. (Agents and brokers often get a commission from insurance companies for selling plans, but the customer does not pay extra for enrolling with them.)
Or you can shop on your own for exchange plans and determine if you qualify for premium subsidies on Healthcare.gov . You can compare off-exchange plans through one of the many online brokers or directly with insurers.
Shopping for an individual health insurance policy requires time, knowledge, and patience. But armed with the basics and some tools, you’ll have the best chance to find coverage that will meet your health care needs and budget.
When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.
Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.