My Company Doesn't Provide Health Insurance (Gulp!)

The following is an excerpt from You're So Money: Live Rich Even When You're Not, a practical personal-finance guide by Farnoosh Torabi, a senior correspondent for TheStreet.com. The book is aimed at young adults who want to live beyond their means, but spend within them. This excerpt explores the best strategies to setting up your own health-care coverage.

Let's start with the most health-care challenged of all of us: those who cannot get group health insurance through an employer. Some of us are self-employed and others may not have full-time gigs with guaranteed discounted group health benefits.

But I can bet we'll probably at some point between now and the next 10 years get the flu, contract pink eye or chip a tooth.

Hopefully not all at the same time.

So it's worth it to have some basic coverage. (If it makes you feel any better, those of us who have discounted group health coverage are still forced to pay more and more out of pocket every year.)

So how to independently buy insurance and avoid paying a fortune? Generally, the cheapest route is getting coverage through your state's HMO, or health maintenance organization. An HMO costs less than buying coverage directly from a health insurance company as an individual, but there are limitations to HMOs. For example, you have to go with a general-practice doctor tied to the HMO plan. Here are some tips to keep in mind before signing up.

Contact Your State Insurance Commissioner's Office. Find out what health programs are offered in your state. Healthy New York, for example, is a state-subsidized program for the self-employed that offers a bare-bones policy at a much lower premium.

Comparison Shop. In some states, like New York, New Jersey and Maine, everyone has access to health insurance, but that doesn't mean it comes cheaply. You should still shop around. Sites like www.ehealthinsurance.com and www.digitalinsurance.com offer comprehensive quotes from various plan providers.

Create Your Own Group. If you can't get group insurance through your employer, make your own group within the company to earn the reduced rate, which can lower your health-care costs by up to 50%. In some states, a "group" constitutes as two or more employees who work at least 25 hours per week.

Join the Freelancers Union. Or some other nearby association, like the local chamber of commerce, that may offer a group health plan, again, with the discounted premiums.

Decide on the Extras. Once you've settled on an HMO plan, decide whether it's worth it to you to pay a little more for a POS, or point-of-service, plan. This is a popular add-on with those who have a particular illness, like diabetes or glaucoma, and may want to visit a certain doctor not included under a standard HMO.

Sign Up When You're Healthy. If you're currently uninsured and break your arm, you better have money saved in the bank. In most, if not all, states, preexisting illnesses or medical conditions are not covered by HMOs for up to a year after enrolling.

Watch Out for Phonies. Health-care fraud totaled $85 billion in 2003, according to the Blue Cross Blue Shield Association and the U.S. Government Accountability Office. So, imagine what it is now, years later. A common trick: using the word coverage instead of insurance to confuse consumers into thinking they'll be covered in times of need. Do a background check by contacting your state's insurance commissioner organization.

Compare health-care programs at www.planforyourhealth.com.