What Is Individual Health Insurance?

The three main types of individual health insurance are short-term insurance, Affordable Care Act coverage, and medical indemnity insurance.

Catherine Collins
Catherine Collins

Catherine leverages her background in education and finance to write articles that help readers make informed decisions about their insurance and finances.

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Katie Powers
Edited byKatie Powers
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Katie PowersAuto and Life Insurance Editor
  • Licensed auto and home insurance agent

  • 3+ years experience in insurance and personal finance editing

Katie uses her knowledge and expertise as a licensed property and casualty agent in Massachusetts to help readers understand the complexities of insurance shopping.

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Updated March 13, 2023 at 12:00 PM PDT

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If you don’t have health insurance coverage through an employer, you’ll need to purchase a health insurance plan on your own. 

Since the Affordable Care Act (ACA) passed in March 2010, individual health insurance plans have been more accessible to people who need them. The law made health insurance available to more people, especially people without a workplace health insurance plan.[1] 

Individual health insurance plans are also helpful for people experiencing a gap in coverage, perhaps due to job loss or self-employment.

Here’s what you should know about individual health insurance.

What is individual health insurance?

Individual health insurance is a type of health insurance that differs from employer-based health insurance and Medicare. Rather than a company purchasing a group policy for all its employees, a single person purchases an individual health insurance plan for themselves or their family.[2] This coverage is sometimes referred to as private health insurance, direct-purchase health insurance, ACA insurance, and Obamacare.

These are the three main types of individual health insurance:

  • Affordable Care Act

  • Short-term

  • Medical indemnity

Do I Need Health Insurance Coverage?

Do I Need Health Insurance Coverage?

Affordable Care Act insurance

A healthcare reform law with several purposes, the ACA intends to make health insurance available to more people. Some people know it as Obamacare because President Barack Obama signed the act into law.

ACA insurance works best for people without a work-sponsored health insurance plan or with a current gap in insurance due to a life change. 

How to purchase insurance from the ACA marketplace

You must be eligible in order to purchase coverage from the ACA marketplace. You’re eligible to enroll in the marketplace if you’re an un-incarcerated U.S. citizen or national living in the country.[3] Additionally, people with Medicare are not eligible for marketplace coverage. 

To enroll in coverage, visit HealthCare.gov during the open enrollment period, which always spans from Nov. 1 to Jan. 15. Though this period represents the primary enrollment period, some exceptions may allow you to enroll in a healthcare plan outside this time frame. Qualifying exceptions include major life changes like marriage, divorce, having a baby, or losing your existing healthcare coverage.

Currently, 18 states operate state-based marketplaces, while the others have state-federal partnerships. California is the largest state with its own marketplace.

When is Health Insurance Open Enrollment?

When is Health Insurance Open Enrollment?

Short-term insurance

Short-term insurance describes a healthcare policy you can purchase any time of year if you need coverage due to a temporary coverage gap. This insurance coverage usually lasts for a year or less. 

Short-term insurance differs from ACA-compliant plans because you can purchase it any time of year from an insurance company that offers it or from a private exchange. Depending on your health and history, you may not be approved for this type of insurance because the ACA marketplace guidelines don’t apply.

How to purchase short-term insurance

People typically purchase short-term health insurance from private health exchanges or private healthcare companies.

“Short-term plans often have limited benefits and do not provide the same level of protection as comprehensive health insurance plans,” says Lisamarie Monaco, an agent with National Independent Life Insurance who specializes in U.S. policies related to health and critical illness. Before you decide to buy a short-term insurance policy, make sure you fully understand what your plan covers and what it excludes. 

Medical indemnity insurance

Also referred to as fee-for-service insurance, medical indemnity insurance is a plan in which an insurance company pays a set amount for a specific service. Providers decide the set amount, and you, as the policyholder, must cover the remainder of the payment. Many people use coverage called hospital indemnity insurance as a supplement to existing health insurance to help pay for extra expenses.

Keep in Mind

Indemnity plans are similar to HSA and FSA plans because they help cover healthcare costs. But HSA and FSA plans are health savings accounts and an indemnity plan is an insurance policy.

How to purchase medical indemnity insurance

You can purchase medical indemnity insurance through private health insurance companies. Plans can start at around $10 per month. This plan type can help make healthcare costs more manageable, especially for people with expensive or unexpected hospital stays.  

Research the types of indemnity plan options available in your state to find one that’s right for your needs.

How Are Health Insurance Premiums Calculated?

How Are Health Insurance Premiums Calculated?

Cost of individual health insurance

On average, health insurance premiums in the United States cost $456, according to the Kaiser Family Foundation.[4] However, premiums vary depending on your age, location, tobacco use, plan category, and more.[5] Keep in mind that when your premium payment is low, your deductible increases and vice versa. Here are costs for the three types of individual plans:

  • Affordable Care Act: The Affordable Care Act includes five different categories: bronze, silver, gold, platinum, and catastrophic. Bronze plans typically have the lowest monthly premiums, followed by silver, gold, and platinum. The average premium for a bronze plan costs $342 per month, a silver plan costs $448, and a gold plan costs $472.[6]

  • Short-term: Short-term health insurance premiums vary depending on location and can be as little as $25 per month to almost $1,000 per month.[7]

  • Medical indemnity: Medical indemnity insurance, or hospital indemnity insurance, can cost as little as $10 per month, but costs vary depending on your health and coverage choices.

What Is a Health Insurance Deductible?

What Is a Health Insurance Deductible?

Individual health insurance FAQs

Here are answers to some common questions about individual health insurance.

  • Who needs to purchase individual health insurance?

    People without access to employer-sponsored health insurance plans or who have a gap in coverage due to a life change typically need to purchase an individual health insurance plan.

  • What type of individual health insurance should you buy?

    The best type of individual health insurance plan for you will depend on your personal situation, your health history, and your budget. Some insurance plans offer more affordable premiums with higher out-of-pocket costs, while others charge higher premiums with a lower deductible. It’s important to choose the best one to suit your lifestyle and budget, so you need to research what your plan includes and excludes before purchasing.

  • How much do people in the U.S. pay on average for health insurance?

    The average health insurance annual premium in 2021 was $7,739 for a single person and $22,221 for a family, according to data from the Kaiser Family Foundation. The foundation data shows that these prices increased by 4% in one year.[8]

  • What do you do if you have a gap in healthcare coverage?

    You have insurance options if you experience a gap in healthcare coverage because of a job loss, marriage, divorce, or something else. You might be able to sign up for COBRA coverage, which lets you pay to stay on the plan your former job provided. You can also enroll in an ACA marketplace plan.[9]

Sources

  1. HealthCare.gov. "Affordable Care Act (ACA)." Accessed February 28, 2023
  2. United States Census Bureau. "Health Insurance Glossary." Accessed February 28, 2023
  3. HealthCare.gov. "Are you eligible to use the Marketplace?." Accessed February 28, 2023
  4. Kaiser Family Foundation. "Marketplace Average Benchmark Premiums." Accessed February 28, 2023
  5. HealthCare.gov. "How insurance companies set health premiums." Accessed February 28, 2023
  6. Kaiser Family Foundation. "Average Marketplace Premiums by Metal Tier, 2018-2023." Accessed February 28, 2023
  7. Kaiser Family Foundation. "Understanding Short-Term Limited Duration Health Insurance." Accessed February 28, 2023
  8. Kaiser Family Foundation. "2021 Employer Health Benefits Survey." Accessed February 28, 2023
  9. Kaiser Family Foundation. "Understanding Short-Term Limited Duration Health Insurance." Accessed February 28, 2023
Catherine Collins
Catherine Collins

Catherine Collins is a freelance financial writer and author based in Detroit. She's the co-founder of MillennialHomeowner.com and MomsGotMoney.com, and author of the book Mom’s Got Money: A millennial mom’s guide to managing money like a boss. She has written for US News, Huffington Post, Money, Business Insider, Investopedia, Entrepreneur, Go Banking Rates, and many other publications. She currently resides in Detroit, Michigan with her boy-girl twins and a rescue dog named Julep.

Katie Powers
Edited byKatie PowersAuto and Life Insurance Editor
Photo of an Insurify author
Katie PowersAuto and Life Insurance Editor
  • Licensed auto and home insurance agent

  • 3+ years experience in insurance and personal finance editing

Katie uses her knowledge and expertise as a licensed property and casualty agent in Massachusetts to help readers understand the complexities of insurance shopping.

Featured in

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