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updated 11/13/2007 1:40:10 PM ET 2007-11-13T18:40:10
COMMENTARY

For years, if an employer offered health insurance to a worker, the worker generally took it.

Now some workers are for the first time entertaining another option: private health insurance. Some employees, particularly those at smaller companies, are finding it's cheaper to get spouses and children covered by private policies than under their employers' plans.

A decade of inflation-topping health-care cost increases and the fact that employees are now picking up a larger slice of the bill through higher premiums and greater out-of-pocket expenses are behind the trend.

"If you are healthy, there are powerful economic incentives to see if you can strike a better deal on your own," says Alwyn Cassil, a spokeswoman for the Center for Studying Health System Change.

According to a recent survey by the Kaiser Family Foundation and the Health Research and Educational Trust, 37 percent of employees who work in a company with three to 199 employees can expect to pay 50 percent or more of the premium for family coverage, compared with just 5 percent of employees at larger companies. With the average annual premium for family coverage now more than $12,000, employees at smaller companies can end up paying $504 or more a month.

"It's hard to gauge how many people are opting out of employer-sponsored coverage," says Gary Claxton, a vice president at the Kaiser Family Foundation, a nonprofit focused on health-care issues, "but the numbers could increase if employees face further cost increases and are willing to take less generous insurance coverage."

Ruth Coombs and her family illustrate the trend.

About three years ago, Coombs, now 51, a registered nurse from San Antonio, began reconsidering her family's health insurance options after receiving the news that it would cost $700 a month, up from $632 a month to cover her and her two stepchildren under her husband Gary's employer-sponsored plan.

Coombs thought the family could get a better deal if he elected employee-only coverage and she purchased a private policy for herself and the two stepchildren.

She went shopping online and selected a PPO plan with Assurant Inc. with a $5,000 deductible and zero percent coinsurance for doctors and hospital expenses. The cost: $273 a month.

"We are healthy and considering what we would be saving in premiums, I thought we would be better off," says Coombs. "We just need protection against a catastrophic medical event, such as a car crash or a cancer diagnosis."

A growing number of the 60 percent of consumers using eHealthInsurance Services Inc., an online insurance broker, to purchase new policies are in a similar situation to the Coombses, says Sam Gibbs, a senior vice president there. The other 40 percent are "the young invincibles," he says, 22- to 32-year-olds who were previously uninsured.

Proponents of private policies tout their relatively low monthly premiums. Typically, the cheapest policies are plans with the highest deductibles, expenses consumers must pay before their insurance kicks in.

Consumers can also avoid paying for benefits they don't need. For instance, young, single men have no need for maternity coverage.

In addition, private policies are portable, and so if you change jobs, you don't have to worry about losing coverage.

Purchasing a high-deductible health plan can make sense if you are young and healthy, especially if you open a health savings account, which enables you to pay for out-of-pocket medical expenses with pretax dollars.

However, there are caveats. Private policies can turn out to be more costly because they cover fewer medical services and don't provide the same legal protections group policies do. Under federal law, in an employer-sponsored health plan you can't be denied coverage on medical grounds.

By contrast, in the majority of states, private policies can permanently exclude pre-existing conditions, such as high cholesterol, or deny you coverage for chronic illnesses, such as diabetes. If you get sick, you can see your premiums soar — and switching to another insurer may not be an option due to your poorer health status.

If are thinking of purchasing a private policy, do your homework. Premiums vary widely by state. For instance, the average monthly premium for single policies ranged from $157 in California to $504 in New Jersey.

Don't just go for the lowest premium; think about the coverage you need and whether your doctor is in-network.

You can compare plans online at sites such as www.ehealthinsurance.com and www.healthinsurance.com or find a health insurance broker at www.nahu.org.

Experts also advise calling your state insurance department to check that the insurer is licensed in the state where you live and get information about any complaints.

And read the fine print. Coverage for certain services, such as annual physicals, may not immediately kick in.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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