Stern Advice: When to skip your employer's health plan

A women looks over the letter from her insurance provider at her home in Louisville, Kentucky, April 21, 2010.

WASHINGTON (Reuters) - Last week, for the second year in a row, I decided to pass on my employer's generous health insurance plan and buy my own privately.

I did that even though (1) my husband is self-employed and we buy our own coverage in the often-critized public market; and (2) the coverage provided by my employer is a good, generous, union-negotiated plan; and (3) we are probably going to spend about $2,500-a-year more in premiums and co-insurance than we would if we were buying into the company plan.

Why would I do that? My case may be very specialized. I'm in my late 50s (I have my faults, but lying about my age isn't one of them) and we've been buying the same coverage for more than a decade. So, our monthly premiums are comparatively low, and our coverage is decent.

If I were to leave this job anytime between now and my Medicare-eligible 65th birthday (NOT that I'm considering that, boss!), I'd have a very hard time going back into the public market and buying a comparable and affordable plan. At least until 2014, when state exchanges are supposed to spring up in response to the Affordable Care Act.

Furthermore, we buy one of those very-high-deductible plans that are paired with a health savings account, and we use the health savings account to stash away some $8,000 a year -- tax free -- for retirement. Our workplace plan doesn't offer that option, so I'm taking a pass.

That's just me.

In general, if you're in a job that has a good health-care plan, it's usually a good idea to sign up. Employer-provided plans typically offer a high level of coverage, and they have to take you regardless of pre-existing conditions that could doom your attempts to buy private health insurance between now and 2014 (or thereafter, if the Supreme Court strikes out portions of the healthcare legislation.)

But sometimes, buying your own coverage makes sense. Here are some considerations about when you may want to do that, and how to go about it.

-- You may decide to split up the family. It may seem like a convenience to have every member of your family on the same health-care plan, but that convenience isn't really worth much. Increasingly, employers are paying for their employees' coverage, but making workers pay out of pocket to add spouses and children to the plan. In cases where both spouses each have their own subsidized health insurance, they may find that the best deal is for each spouse to sign up for his or her own company plan.

You can cut your kids loose, too. Laryl Hutchin is a single mother working for a nonprofit in Denver, Colorado. She was unpleasantly surprised to discover that while her health insurance was free, it would cost her some $240 a month to enroll her son, then 4 years old, in her company plan. Hutchin found a policy from Rocky Mountain Health Plans that covers her son for about $50 a month. "It's been great," she says, one year later.

-- Your young-adult offspring may be partially launched. It's true you're allowed to keep them on your plan up to the age of 26, but if they live in another state, that's not always practical: Your employer's health insurance plan may not work with their providers, leaving them with the kind of reduced coverage that "out of plan" visits typically get. If your 20-something is basically healthy and in a typical no-benefits starter job, you can probably buy him an affordable plan that works locally.

-- You may want healthcare coverage that fits you. Check out your employer's plan carefully. If it's stingy on maternity benefits and you're planning to get pregnant, or it won't pay for the drugs your doctor wants you to take, that's another reason to check out private plans.

-- You may just want to save money. Employers are increasingly shifting healthcare costs to their workers, so that makes private plans more competitive. According to the latest customer survey from eHealthInsurance, an online brokerage, the average monthly premium paid for individual policies bought at the site in February was $183, with an average deductible of $2,935. The average for family policies was a premium of $414, with a deductible of $3,879. Half of all policy holders paid under $150 a month for an individual policy and under $354 for a family policy, so compare your work plan with those rates.

Those high-deductible plans, when coupled with a healthcare savings account, are another good opportunity for folks who can afford to take advantage of them. Workplace flexible spending accounts and so-called health reimbursement arrangements are typically organized on a use-it-or-lose-it basis. But individually owned healthcare savings accounts are yours to use forever. (Some employer-provided high-deductible plans allow you to open your own take-it-with-you HSA). With an HSA, you can set aside pre-tax money to fund out-of-pocket healthcare costs, but you can also save it from one year to the next and use it years later, in retirement, when your healthcare might get really costly. Withdrawals are tax free when used for health expenses.

-- You have to shop carefully. Whatever the reason for passing up the company plan to buy your own, you have to be really careful that you're buying a decent plan. Compare rates at sites like ehealthinsurance.com and netquote.com. Look up your state's insurance authority and see if it lists plans for your state. Ask the bookkeeper who works for your favorite doctors what it's like to work with those carriers you are considering. Hutchin got good advice from the human resources director at her company, though that's probably unusual.

Look through the policy to make sure your particular issues are covered. And prepare to revisit it all next year, when open enrollment season comes back around. Everything might be different by then.

(The Personal Finance column appears weekly and at other times when warranted. Linda Stern can be reached at linda.stern(at)thomsonreuters.com)

(Editing by Gunna Dickson)