Searching for health insurance on your own can be a daunting task. One strategy is to turn to a professional organization or other association that offers health insurance among its benefits.
That can be a good alternative if the association is a well-established membership organization set up to offer a range of benefits and can negotiate group rates from insurance companies. But it can backfire when the association is made up of loosely affiliated members who join mainly to buy health insurance.
Many so-called discretionary associations offer few benefits besides health coverage. Insurance offered by these associations may be marketed as group insurance, but it's really individual coverage and does not provide the protections of traditional group plans. Plus, associations often dangle enticing teaser rates that soon disappear, according to a recent report by Families USA, a consumer-advocacy group in Washington.
"The issue here is that consumers think they're getting something they're not," says Sonya Schwartz, co-author of the report.
If you buy insurance through an association and your premiums head skyward, there may not be much you can do besides shop for another insurer. But there are some steps you can take before you sign up.
First, contact your state insurance department. If the insurer is a legitimate company, it will be licensed to do business in your state, says Sandy Praeger, the insurance commissioner for Kansas. But legitimate — and licensed — is no guarantee that you won't be misled or buffeted by steep rate hikes.
Second, get the policy and read it carefully. Some association plans have big gaps in coverage, such as limits on hospitalization benefits that could leave you liable for huge bills. Many states have a "free look" period of, say, 10 days, during which you can review the policy and get a full refund of your premium if you cancel. Unfortunately, association plans may not be covered under such consumer-protection rules.
Third, use an agent. "We have the knowledge, we're licensed by the state, and we have to follow the law and know what we're selling," says Jackie L. Spragins, an insurance agent in Wichita Falls, Tex., who is also a former president of the Texas Association of Health Underwriters.
Consider discretionary-association-plan insurance only as a last resort. You may be able to afford an individual policy if, for example, you accept a large deductible and skip prescription-drug coverage.