How to tell a solid private-market plan from a risky one

This is for people who buy their own coverage, are in good health, and earn too much for a Marketplace tax credit: the self-employed, people retiring before 65, families paying full price. If your health qualifies you, a private-market plan outside the ACA can often cost less than the Marketplace, and most of the ones I place come with a PPO network. They aren't ACA plans, and they aren't all built the same. The good ones are easy to spot once you know where to look in the plan's brochure or certificate. Here are the seven things I check.

1. When are the health questions asked?

A plan can look at your health at two points: when you apply, or after you file a claim. You want the first.

With a well-built plan, the application asks about your health history and the insurer reviews your health answers before you're covered. If your health qualifies you, you get an offer and its terms up front. You know where you stand before you pay a premium.

The risk is a plan that asks little up front and goes looking later. HealthCare.gov defines rescission as "the retroactive cancellation of a health insurance policy" and says insurers "will sometimes retroactively cancel your entire policy if you made a mistake on your initial application." On ACA plans that's illegal except for fraud or intentional misrepresentation. Outside the ACA, the plan's own terms say when coverage can end, so read them.

A good answer: detailed health questions on the application, and a pre-existing condition section that says what happens to the conditions you list. On the plans I place most, a condition you disclose on the application is covered from the start unless the plan limits it some other way. One you leave off isn't covered until the plan has been in force for the waiting period it states, and fraud or intentional misrepresentation on the application is one of the listed reasons coverage can end. So answer every question, fully.

2. Is it guaranteed renewable?

Renewability is about whether the insurer can refuse to renew you next year. The main plans I recommend are guaranteed renewable to 65 once you're approved, subject to the policy's terms. Add-on options and riders have their own terms, and I go through those with you. On any plan, look for the words "guaranteed renewable" in the plan's own documents. One brochure I work from says coverage is "guaranteed renewable, subject to the termination provisions." The second half of that sentence matters, so read the termination list too. On a solid plan, the reasons coverage can end look like this:

• You stop paying the premium, after the grace period.
• You cancel.
• Fraud or intentional misrepresentation on the application or on a claim.
• The insurer stops offering that plan in your state, for everyone on it.
• You leave the association that holds the group policy, or that group policy ends, if the plan is sold through one.
• You reach 65 or become eligible for Medicare.
• Benefits paid reach the plan's lifetime maximum, if it has one.

A good answer: "guaranteed renewable" in writing, and nothing on that list about getting sick or filing claims. Then check how rates change. The same brochure says the insurer won't raise your premium individually because of your own claims, though it can raise rates for everyone in your rate class in your state. If a plan's terms let it end your coverage because you got sick or filed claims, keep looking.

3. Is there a real PPO network you can check?

Most of the private-market plans I place are PPOs. That usually means a wider choice of doctors and hospitals than the lowest-priced Marketplace plans, which are mostly HMOs. But "PPO" on a brochure doesn't mean your doctor is in it. Before you apply, search the plan's provider directory for your doctors, the hospital you'd use, and anyone you see regularly. Ask what the plan pays, and what you pay, if you see a provider outside the PPO.

A good answer: a named national PPO network, a directory you can search yourself, and your doctors in it.

4. What's paid from the first dollar, and what waits for a deductible?

Many private-market plans pay for some everyday care with no deductible: office visits, prescriptions, lab work, wellness visits. On the plans I place, that first-dollar part pays fixed benefits. A fixed benefit is a set dollar amount for each service, written in a schedule, and it's paid from the first visit with no deductible to meet. Because it's a set amount rather than a percentage of the bill, the schedule is the thing to read.

Then find out which part of the plan handles bigger bills, like a hospital stay or surgery, and what deductible applies there.

A good answer: a written schedule with the dollar amount the plan pays for each common service, so you can compare it with what that care costs near you. And a clear line between what's paid from the first dollar and what waits for a deductible, with the deductible stated.

5. Can you add more coverage later without new health questions?

Some plans let you add more coverage later without answering health questions again. If your health changes, that's worth a lot. These options differ, so read the terms:

• Is it a one-time option, or can you use it more than once?
• When can you use it? Some allow it at any time, even in the middle of a claim.
• Does it cover conditions that started after you joined the original plan?

A good answer: the option, and the answer to each of those questions, in writing. I go through them with you before you apply.

6. Is it actually insurance?

Health care sharing ministries are not insurance. Members share each other's medical bills, and nobody is required to pay yours. Florida law, section 624.1265, requires these organizations to give a notice that says, in substance, that the organization "is not an insurance company," that "no other participant is compelled by law to contribute toward your medical bills," and that "you are always personally responsible for the payment of your own medical bills." To stay outside Florida's insurance code, they also can't be sold through licensed insurance agents. I don't offer them.

A good answer: an insurance company named as the insurer on the documents, and an agent licensed in your state who can show you the policy.

7. What isn't covered?

A good plan outside the ACA tells you up front that it isn't an ACA plan. The disclosure on the plans I place says they're exempt from the ACA's requirements, don't count as minimum essential coverage under the ACA, and don't cover all ten essential health benefits, and that benefits may be subject to a pre-existing condition limitation and other limits and exclusions. HealthCare.gov describes the essential health benefits as 10 categories ACA plans must cover, including doctors' services, hospital care, prescription drugs, pregnancy and childbirth, and mental health services.

A good answer: that disclosure in writing, a list of exclusions you've actually read, and an agent who explains what isn't covered as well as what is. If you need care in a category the plan leaves out, an ACA plan may be the better fit.

How I decide

I compare both sides of the market for everyone. Then the order goes like this:

• If your health qualifies you for a private-market plan that passes this checklist and fits your budget, that's usually where I start.
• If your health, your budget or your income makes the Marketplace the better fit, we go that way. If you qualify for a tax credit, the Marketplace may cost less.
• If a plan I don't have access to fits you better, I'll refer you to someone who has it.

No one plan fits everyone. The checklist is how you know what you're buying, whichever way you go. The private vs. marketplace guide covers the tradeoff in more detail.

Questions people ask

Are private health insurance plans safe?

The well-built ones are. They ask health questions when you apply, are guaranteed renewable in writing, and don't list getting sick or filing claims as a reason your coverage can end. Read the plan's own documents, not the ad.

Can a private-market plan drop me after I get sick?

Check the plan's termination list. The main plans I recommend are guaranteed renewable to 65 once you're approved, subject to the policy's terms. Add-on options and riders have their own terms, and I go through those with you. On a guaranteed renewable plan, the listed reasons are things like unpaid premium, fraud or intentional misrepresentation on the application, the insurer leaving your state, or reaching 65. Getting sick shouldn't be on it. If it is, or the plan isn't guaranteed renewable, keep looking.

Do private-market plans cover pre-existing conditions?

It depends on the plan, so read its pre-existing condition section. On the plans I place most, a condition you disclose on the application is covered from the start unless the plan limits it some other way, and one you don't disclose isn't covered until the plan has been in force for the waiting period it states. Answer every health question fully.

Is a health care sharing ministry the same as insurance?

No. Florida law requires a notice saying the organization is not an insurance company and that you are always personally responsible for your own medical bills.

Are these ACA plans?

No. Private-market plans outside the ACA are exempt from its rules, don't count as minimum essential coverage, and don't cover all ten essential health benefits. Off-exchange ACA plans are different: they're ACA plans sold directly by the insurer instead of through the Marketplace.

The bottom line

A private-market plan outside the ACA can be a good buy for someone whose health qualifies them and who earns too much for a credit. What separates a solid one from a risky one is in writing: when it asks about your health, whether it's guaranteed renewable, the network, what it pays and how, and what it leaves out. Text or call and we'll read one together.