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What Is Individual Health Insurance and What Are Your Options?

Mar 29, 2020 4 min read Roxanna Guilford-Blake

Key Takeaways

  • Individual health insurance is health insurance that will cover you alone or you and your family if you don't otherwise have coverage through your workplace or spouse.
  • The individual health insurance market is regulated by the Affordable Care Act (ACA) and, if you are eligible, you could save money on your monthly premium if you buy your health coverage through HealthCare.gov.
  • With many plans, you may also be eligible to open a health savings account (HSA).



Maybe you have already had a successful career and you think it is now time to strike out on your own. Or perhaps, at 56, you want to retire early. Whatever the reason, congratulations! But now that you're on your own, you will need to buy your own affordable individual health insurance. With employer-sponsored health insurance, your employer makes most of the decisions and presents you with one or more options; it's convenient and usually cheaper than individual health insurance, depending on what your employer contributes toward the premiums. But as you strike out on your new path, you will have an opportunity to choose your insurance company, plan design, and level of coverage. And because it's not tied to an employer, you can keep the insurance for as long as you want.

How do I do that? Simple, either through HealthCare.gov Opens in new window, directly from an insurer, or from a licensed broker.


How to buy individual health insurance

Open enrollment

As with employer-based coverage you have a limited window, called open enrollment, when you can buy individual health insurance. There are some cases, though, in which you can enroll outside of this window — one of them being loss of employer coverage. That means if you have retired or left your job to start your own business, you are eligible to enroll anytime. Otherwise, you need to wait until open enrollment. The 2021 open enrollment period runs from November 1 to December 15, 2020, though a few states extend the deadline through January 2021.


What plans are available in your state

To start, find out what plans are available in your area. Not every health plan serves every state and, often, the options even vary by ZIP code. You can learn which plans serve your area by talking to a licensed broker or by using the HealthCare.gov Opens in new window Plan Finder.

Before signing up for a plan, though, you will want to see if you're eligible for a premium tax credit through the ACA. This credit reduces the costs of premiums purchased through the ACA Marketplace. To be eligible, your income must be between 100% and 400% of the federal poverty level Opens in new window: That is a maximum of $49,960 for an individual, $67,640 for a couple and $103,000 for a family of four.


Health insurance, credits, subsidies and the ACA

When you apply for coverage through the health insurance exchange and provide your income information, you will learn whether you are eligible for a subsidy. You do not have to apply to find out the amount you are eligible for: Just use the HealthCare.gov Opens in new window calculator.

The subsidy is in the form of a tax credit. You can opt to receive it in advance and lower your premium payments, claim it later when you file your tax return or some combination of the two. Keep in mind that you will have to repay the difference if your 2020 income exceeds the threshold.

For example:

Elizabeth left her job to start a consulting business. She applied through the ACA Health Insurance Marketplace for 2020 coverage and, based on her estimated 2020 income, discovered she is eligible for a $400 monthly subsidy. But her new business ends up having a stellar first year and her 2021 income ends up being well over $68,000. She will have to repay the credit when she pays her 2021 income tax.

Ian is opening a bakery. Based on his 2020 income, he did not qualify for the credit. Because 2021 ends up being a building year, he takes home only about $30,000. He is still eligible for the credit and it will be applied to his 2021 income taxes.


The cost of individual health insurance coverage

There are four types of individual health plans with increasing levels of coverage and cost: Bronze, Silver, Gold and Platinum. In other words, the Bronze plan will have the lowest premiums but the highest copays and deductibles and the Platinum plan will have the highest premium and the lowest copays and deductibles. Your subsidy is the same amount regardless of the plan type you select. Keep in mind that all plans provide free preventive care.


2020 individual health insurance: things to know

In 2020, if your individual plan deductible is between $1,400 and $6,900, or between $2,800 and $13,800 for family coverage, you can contribute to an HSA. Contributions are in pretax dollars, the money grows tax-free and withdrawals are tax-free if you spend the money on medical expenses. According to the IRS Opens in new window, you can invest thousands: in 2020, you can contribute up to $3,550 if you're the only one insured and $7,100 if you have family coverage.

If you're an early retiree between the ages of 55 and 65, you can contribute an extra $1,000 each year. Investing in an HSA is a good way to lower the costs of your out of pocket expenses.


What you can do next

Learn more about where to buy individual health insurance by calling a licensed broker or use the HealthCare.gov Opens in new window Plan Finder to learn what options are available and pick the plan that best fits your needs.

If an individual health plan does not fit your needs right now, consider buying a short-term, limited-duration insurance coverage Opens in new window as a potential option.



Roxanna Guilford-Blake is a member of the American Medical Writers Association with 25+ years of experience.


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