For the past few years, my wife and I have had our health insurance through her employer. Before that, when I was a W-2 employee for Analysts International, we had it through them. When it came time to sign up for the 2006 health insurance plan, I decided to buy my own.

The problem with having your employment and health care tied together is that when you are most in need of health insurance, you’re least able to work. Many employers wouldn’t continue keeping someone as an employee while they spend 3 months in traction and another 2 recovering at home. The kinds of illnesses and accidents that can result in $500,000 worth of medical expenses are the same ones that will have your employer “letting you go”. Yes, COBRA insurance is offered to you to continue after you are no longer employed, and that’s a good thing. However, the last time I was offered COBRA, the monthly premiums were $800/month for what I found on the open market for $250.

Since there are only two of us, and her policy considers two the same as “family”, the rates are higher for us than they need to be. So, I set out to get my own policy. I used EHealthInsurance (EHI) to go through the process. I think that how I made my decisions and what I learned along the way might be useful if you’re wondering about individual health insurance as well.

EHI lets you shop for policies without giving any contact information. That was one of the “pro” arguments for using them. You do need to give age and smoking information for everyone who will be on the policy; then you can start looking at plans.

My philosophy on health insurance is to have a total annual cost of health care (a known maximum out-of-pocket cost). This includes flu shots, an occasional doctor’s visit, a couple of teeth cleanings, a new pair of glasses, and any emergencies that may come up. Everything except the emergencies is fairly routine. There aren’t major variations in what that includes from year to year. Hence, it should be planned for and not a big surprise that I need to buy a new pair of glasses.

That’s why the new HSA (Health Savings Account) setups appealed to me. They set a higher deductible (you pay for the first $X of your health care each year), but you can set the money aside pre-tax via the HSA - and if you don’t spend it all, it rolls over each year for medical expenses, and finally into an IRA when you retire. This is the setup that most effectively manages my annual health care costs, which is the only number I care about.

So, I started by only looking at plans with an HSA. Then I filtered out what I consider to be one of the most dangerous things in US health insurance: policies where the insurance company pays only 80% of the bill after your deductible, instead of 100% of it. That’s fine if the bill is $1000; I can manage to pay $200. But a couple of weeks in the hospital, trips via helicopter and ambulance through 2 hospitals and the emergency room can quickly approach $250,000, so 20% can leave you (the person who has health insurance) with a bill for $50,000. It’s no wonder that medical bills are the number one cause of bankruptcy in the nation. Catastrophe (cancer, accident, etc.) is the main reason for having health insurance, instead of just relying on a loan or a credit card when in need. If a policy doesn’t cover all of the disaster, it might as well have not covered any of it.

As a result, I won’t consider any policy that doesn’t have 100% coverage after the deductible. This is called no “coinsurance” (no payments by the insured beyond the deductible). I added that to the HSA filter. I was then presented with a variety of policies to choose from, based on where I live and those filters. They ranged from $5000 deductibles to $1000 deductibles among various companies. As I’ve already been dealing with Blue Cross, I narrowed the field a bit more. The price range among the policies was now mostly about deductible. So I did some number crunching. The higher deductible plans (where you may potentially pay more out-of-pocket during the year for your total health costs) didn’t reduce the premium payments by nearly as much as the extra annual cost could be; in other words, the tradeoff wasn’t worth it. Thus, I ended up choosing a plan that, for me, was $116/month for a $1000 deductible and no coinsurance. (Your rates will vary according to age, health, etc.) This was better than the policy I was on.

Next, I began to fill out the application, where I made my first big mistake. I hadn’t gathered all of my medical information. You’ll need your doctor’s name and address, medications and treatments for the past 5-10 years, etc. In short, dig up all of the medical info you can find before you start. It will save you a lot of time. Because I didn’t have all of the info handy, it took me a while to finish the application. Every time I’d finish a step, they’d ask for more information I didn’t have handy.

This led to my second mistake. I didn’t plan on it taking as long as it did to fill out the application - and when I was finally done, I was shocked to find out that EHI, while a web-based setup, gives you a PDF to print out and mail in with a check. By the time I reached this step, I was faced with the reality of the calendar. My previous insurance was about a week from expiring and I had to mail this thing in and wait for it to be processed. I had visions of contracting a long-term life-threatening illness while a hospital administrator shook his finger at the doctors’ every test and treatment suggestion.

So, I filled out the form that they suggested to get a short term policy. This was something like $50/month and would cover until the regular policy kicked in. Enter my third mistake. When I was asked questions about whether a policy would be in effect when the short term policy kicked in, I overthought it and said that, yes, there might be if my application for the regular policy went through by then. I was rejected.

When I recovered, I called the phone number to see if I could straighten this out. I did, in about 10 minutes; I was given the “right” answers to the questions and sent on my way to reapply for the short term setup. This policy went into effect immediately and the nervous freak on my shoulder went back into lurking in the shadows. I was covered.

“But you still don’t have the real policy approved yet”, whispered the freak from his hiding place. The freak had a point. But, I got a notice in the mail yesterday that my policy is underwritten and that the rest of my information is on its way. When it arrives, I’ll cancel the short term policy, set up my HSA, and I will officially join the ranks of those who have individual health insurance.