Covering Your Own Health

Buying Insurance Is Costly and Confusing, and 18 Million Americans Do It

Health care insurance is key to a family's financial security, perhaps second only to a paycheck. For the vast majority of workers, medical coverage comes through an employer. But more employers, particularly smaller ones, say it is too expensive to provide health insurance for workers. As a result, a growing number of Americans are faced with buying coverage for themselves.

The insurance industry argues that most people who want a policy can get one and that it will be adequate. Critics, however, contend that many people either are rejected for coverage or can't afford it, and that those who do get a policy may find its protections very limited.

The numbers suggest that buying health insurance for yourself isn't easy. Although about 18 million Americans do buy insurance on their own, nearly 47 million have no insurance at all. (The rest are covered through their employers or under a government program such as Medicare for the elderly or Medicaid for the poor.)

At issue is what is called the individual medical insurance market. This is insurance bought one policy at a time from commercial carriers, and it differs in many important respects from the group market in which employers provide coverage to their workers and, with declining frequency, to retirees.

First, much of the group market involves companies, typically big ones, that insure themselves. In simplest terms, these employers agree to pay their employees' health-care costs themselves and hire another company, often an insurer, to administer the claims. Self-insured health-care plans are regulated by a federal law, the Employee Retirement Income Security Act of 1974.

The individual market is regulated by the states, so requirements on insurers, consumer protections and policy offerings vary widely.

When individuals leave group plans, parts of two other federal laws may come into play: the Comprehensive Omnibus Budget Reconciliation Act of 1986, and the Health Insurance Portability and Accountability Act of 1996, known by their acronyms, COBRA and HIPAA.

Despite all those laws, millions of Americans cannot get insurance, either because they can't afford it or because they are rejected by carriers as too sick to insure.

Nonetheless, because a severe illness or injury can result in hundreds of thousands of dollars in medical bills, middle-class and even well-to-do families who do not have coverage through an employer need to try to get whatever protection they can.