Is Private Health Insurance Right for You?

The greatest benefit of working in just about any professional position is health insurance. Depending on the type of coverage your employer provides, this benefit can account for a quarter or more of your total compensation package when you consider your job's pay, vacation and other benefits. This makes health insurance second only to salary when considering the overall value of the work you output. That's why when job searchers are weighing different offers from similar employers, health benefits can make the difference whether or not they accept a position, and why health insurance is such a hot topic in nations such as the U.S. that have not adopted a government sponsored socialized medicine program like so many other nations have.

There is another health insurance option for Americans, however. As more companies have found it necessary to shift the costs of health insurance to their employees to help with their bottom lines, more workers are finding that they can seek to opt out of their employer provided insurance and strike out on their own by buying private individual coverage instead. For years this was a difficult prospect for most people as it was far too expensive to make it worthwhile. In recent years, however, individual insurance providers are finding that more people want to use their services and have adjusted their rates to make this a far more affordable option.

According to a Kaiser Family Foundation report, employer-sponsored health-care costs have risen between six and nine percent yearly over the last few years. Contrast that to what employers pay, on average, which equals about $3,785 a year for single-person coverage and $8,824 for family coverage. In turn, they pass 16% of that premium on average to their individual employees and 28% of it to families. Smaller employers, who cannot foot as much of the bill as large corporations, often charge their employees less for single coverage and more for family coverage. The situation is expected to get worse, as 40% of large employers say they are "very likely" to require more contributions from their employees for health care in coming years.

So is it worth your while to dump your company plan in favor of individual insurance coverage? The answer is: Not so fast. It's incredibly important to get a clear value of your existing coverage from your employer or Human Resources department first along with a good estimate of how much is being deducted from your paycheck each week to cover these costs. With that information in hand, you can do some hunting for individual insurance with a realistic idea of how much money you can save (or lose) by dumping your work insurance.

Here are some of the pros of making the switch to individual insurance:

Keep more money in your pocket - It is possible for healthy families to find competitively priced insurance coverage on the open market. According to the website eHealthinsurance.com, the average individual insurance premium for a single person in California, for example, is just $139 a month, while family coverage costs $357 a month. In most cases, these individuals would pay several hundred dollars more per month through their employers.

Pay for only what you need - With many employer provided plans you don't have a lot of choices or options. On the private market you have more of an ability to choose the coverage you need and ignore the coverage you don't. Paying for only what you need can save hundreds of dollars per month.

Take your coverage with you - When you buy your own insurance you won't be subject to the volatility of changing jobs or layoffs. If you change jobs often, you have to take the gamble that comes with gaps in your coverage either. There are no coverage gaps if you buy your own insurance. You also won't feel like you have to stay at a dead end job just to keep your good health benefits.

There are some definite negatives you should be aware of as well:

Less coverage - Dollar for dollar, employer plans provide more coverage than individual plans. On the individual market you may pay less, but you'll usually get less. Employer subsidies definitely work in your favor in a lot of cases.

Stricter rules - You could be out of luck with private insurance if you have a pre-existing condition. Employer plans must insure everyone in their plan, but individual plans can reject you for many different reasons.

Rates can increase - Premiums for individual insurance can rise with age, so you may be saving money by buying an individual plan now, but farther down the road you may wish that you stayed with your company provided insurance.

After heeding all of this advice, if you do decide to forego your employer's health insurance plan, be sure that you have secured an individual policy first. The worst thing you can do is lose your coverage and have to wait until your company's next enrollment period to get back in. Be smart and do your homework. Crunch the numbers and make sure that individual insurance is right for you. If done right, you could save a lot of money.