1 post tagged “smart health insurance buying”
I have been a health insurance broker for 15 years now, and every day I read more and more "horror" stories that are posted on the Internet regarding health insurance companies not paying claims, refusing to cover specific illnesses and physicians not receiving reimbursement for medical services.
Unfortunately, the reality is, insurance companies are driven by profits and not people (albeit they need people to make profits) which means that insurance companies often look very hard for a legal reason not to pay a claim. However, what most people fail to realize is that there are very few "loopholes" in an insurance policy, which actually give the insurance company an unfair advantage over the consumer.
In fact, insurance companies go to great lengths to detail the limitations of their coverage by giving their policyholders a 10-day free look period, to review their policy. Unfortunately, the majority of policyholders put their insurance cards in their wallet and throw their policy in a drawer or filing cabinet during their 10-day free look period. And, it usually isn't until they receive a "denial" letter from the insurance company after they submit a claim for reimbursement, that they take their insurance policy out of their filing cabinet to read through it carefully.
Since many small business owners rely heavily on the insurance agent to explain the plan's coverage and benefits, typically, individuals who purchase their own health insurance know very little about their plan. Although policyholders may know what they pay in monthly insurance premiums or what amount they have selected for a deductible, they may not really understand their insurance benefits in their entirety.
Purchasing a health insurance policy is NOT like buying a car, in that, the buyer knows that the engine and transmission are automatically included, air conditioning is standard and that power windows and seats are optional.
There are so many variables that consumers have to be aware of when it comes to buying health insurance. These variables, and confusing insurance terminology, are often difficult for the average consumer to understand which is why many small business owners actually put off looking for a new health plan until their rates have skyrocketed to the point that they can no longer afford the monthly premiums. Business owners, who find themselves in this position, often place a greater emphasis on how much the new plan will cost, rather than placing an emphasis on what benefits the new plan will actually offer.
Quite often, consumers that base their purchasing decision entirely on price, don't even realize that their new plan may not provide coverage for specific medical conditions or that the amount allotted for certain treatments may be extremely limited. And, it usually isn't until they receive a large bill from a medical provider which states that "claims were denied" that they realize that they made a critical mistake in plan selection.
As a small business owner, myself, who primarily deals with other small business owners, I have come to the realization that part of the problem is that it is extremely difficult for individuals purchasing their health plan on the open market to distinguish the difference among health plans. It is also equally difficult for consumers to determine what type of health insurance coverage they actually need for their particular situation.
Remember, there is a big difference between the type of health plan consumers actually "need" and the type of health plan consumers actually "want." Let me explain.
Recently, I have read many blog articles that seem to stress that consumers should purchase health plans that offer 100% coverage with a very low deductible. 100% coverage means that after the deductible is met, usually $250, the plan will pay 100% of all covered medical expenses.
Although I agree that these types of health plans have a great "curb appeal." I can tell you from personal experience that these plans are not for everyone, nor are they affordable.
Will a low deductible plan that offers 100% coverage offer the policy holder greater peace of mind? Probably. But is a low deductible health plan that offers 100% health insurance coverage something that most consumers really need? Probably not.
In my professional opinion, consumers must achieve a balance between four important variables; wants, needs, risk and cost when they purchase a health plan. Just like the car analogy, it is important for healthcare consumers to understand what type of health insurance benefits are automatically included or standard and which health insurance benefits are optional. For example, on most health plans, maternity and prescription drug coverage is optional.
With this in mind, if one is healthy, takes no medications and rarely goes to the doctor, do they really need a 100% plan with a $5 co-payment for prescription drugs if it costs them $300 dollars more a month?
Would it benefit a person to pay $200 more a month to have a 90/10 plan with a $250 deductible, or should they purchase an 80/20 plan with a $2,500 deductible which allows them to save $200 a month? Wouldn't the 80/20 plan still offer you adequate coverage? Isn't it more cost effective to put that extra $200 that would be spent on insurance premiums, totaling $2,400 per year in their bank account, "just in case" they may get sick or injured and might need to pay thier $2,000 deductible?
Isn't it smarter to keep your hard-earned money yourself, rather than pay higher monthly premiums to an insurance company for an illness or injury that may never happen?
This is just one example of consumer-driven health care. Another example is an HSA qualified HPHP. A HSA qualified HDHP (Health Savings Account qualified High Deductible Health Plan) may offer a more affordable healthcare option to individuals that are searching for a health plan with very low monthly premiums. Typically, these plans offer policyholders greater flexibility and control in where their health care dollars are spent. Plans often come with a fixed aggregate family deductible, which mean that a separate deductible does not have to be met for each family member on the plan.
In addition to the significant cost savings, policyholders can fund their Health Savings Account (HSA) to pay for routine medical expenses or alternative medical therapies, like acupuncture. Any money in the HSA that is not used for medical expenses can be rolled over to the next year and excess funds can be transferred to a tax deductible, tax deferred, interest bearing account, commonly referred to as a "Medical IRA." These types of health plans can offer tremendous tax advantages to policyholders. Not only can policyholders save money on their health insurance premiums, but they also can use this savings to build a nest egg for retirement. Many HSA administrators now offer thousands of no load mutual funds to transfer your HSA funds into so you can potentially earn an even higher rate of interest.
For more information on HSA qualified HDHPs, click here.
In my experience, I believe that individuals who purchase their health plan based on "wants" rather than "needs" feel the most defrauded or "ripped-off" by their insurance company and/or insurance agent.
In fact, I hear almost identical comments from almost every business owner that I speak to about health insurance.
Comments, such as:
- "I have to run my business; I don't have time to be sick!"
- "I think I have gone to the doctor 2 times in the last 5 years" .......and
- "My insurance company keeps raising my rates and I don't even use my insurance!"
Again, as a small business owner myself, I can understand the frustration that many small business owners express. So, here is the $64,000 question:
Q. Is there a simple formula that everyone can follow to make health insurance buying easier?
A. YES. Become an INFORMED insurance consumer!
If you are wondering what I mean by this, let me explain:
Every time I contact a prospective client or call one of my client referrals, I ask that person a list of questions about their current health insurance policy. You know, that policy that is in their dresser drawer or filing cabinet.
That same policy that they bought to protect themselves and their family from that "worse case scenario" so they wouldn't have to file bankruptcy or lose their home due to unpaid medical debt.
That policy that they thought promised coverage for that $500,000 life-saving organ transplant, for the 40 chemotherapy treatments that they may have to undergo if they were diagnosed with cancer or the many months of physical and/or speech therapy that they might need to fully recover from a stroke.
Q. So, what do you think happens almost 100% of the time when I ask these individuals "BASIC" questions about their health insurance policy?
A. They almost always do not know the answers!
The following is a list of 10 Questions that I routinely ask a prospective health insurance client.
1. What Insurance Company are you insured with and what is the name of your health insurance plan? For example, Blue Cross Blue Shield-"Basic Blue."
2. What is your Calendar Year Deductible and would you have to pay a separate deductible for each family member if everyone in your family became ill at the same time? For example, the majority of health plans have a per person yearly deductible, for example, $250, $500, $1,000, or $2,500. However, some plans will only require you to pay a 2 person maximum deductible each year, even if everyone in your family needs extensive medical care.
3. What is your Coinsurance percentage and what dollar amount (stop loss number) is it based on? For example, a good plan design works this way. After you have satisfied your calendar year deductible, the insurance company will pay 80% ($8,000) and you will pay 20% ($2,000) of the first $10,000 in medical bills that you incur each year. This first $10,000 is termed the "stop loss number." After this brief sharing arrangement is over, the insurance company pays 100% up to the Maximum Lifetime Benefit, which is typically, $2-5 Million per insured for the rest of that calendar year. Then, everything starts over again on the first day of each subsequent calendar year. Stop loss numbers can be as little as $5,000 or $10,000 or as much as $20,000. However, be aware that there are some policies on the market that have NO stop loss number at all! Therefore, it is critical that you ask what your stop loss number is before you purchase a plan.
4. What is your Maximum Out of Pocket Expense per year? Keep in mind that the Maximum Out of Pocket Expenses per year includes all deductibles plus all coinsurance percentages plus all applicable access fees, service deductibles or other fees.
5. What is the Lifetime Maximum Benefit the insurance company will pay if you or someone in your family becomes seriously ill and does your health plan have any "per illness" maximums or caps? For example, some plans may have a $5 Million Lifetime Maximum, but there might be a benefit cap of $100,000 per illness. This means that you would have to develop many separate and unrelated life-threatening illnesses costing $100,000 or less to qualify for the $5 Million of Lifetime Coverage.
6. Is your plan a Schedule Plan, in that it only pays a certain amount for a specific list of procedures? For example, Mega Life & Health & Midwest National Life, endorsed by the National Association of the Self-Employed, (N.A.S.E.) endorses schedule plans under the name "Health Markets."
7. Does your plan have Doctor Copays and are you limited to a certain number of doctor co-pay visits per year? For example, many plans have a limit of how many times you go to the doctor per year for a copay and, quite often the limit is 2-4 visits.
8. Does your plan offer Prescription Drug Coverage and if it does, do you pay a co-pay for your prescriptions or do you have to meet a separate drug deductible before you receive any benefits and/or do you just have a discount prescription card only? For example, some plans offer you prescription drug benefits right away, while other plans require that you pay a separate drug deductible before you can receive prescription medication for a copay. Today, many plans offer no copay options and only provide you with a discount prescription card that only gives you a 10-20% discount on all prescription medications. This is a dangerous policy design that can lead to catastrophic out of pocket expenses if you were to contract any one of a host of major medical conditions such as, Multiple Sclerosis or Rheumatoid Arthritis that require expensive outpatient maintenance medications which are usually not available in Generic form.
9. Does your plan have any reduction in benefits for Organ Transplants and if so, what is the maximum your plan will pay if you need an organ transplant? For example, some plans only pay a $100,000 maximum benefit for organ transplants for a procedure that actually costs as much as $500K or more. In addition, this $100,000 maximum may also include the cost of expensive anti-rejection medications that have to be taken after a transplant. If this is the case, the insured will often have to pay for all anti-rejection medications (a.k.a. Immunosuppressants) out of pocket. Keep in mind that these medications are among the most expensive medications which individuals requiring an organ transplant will have to take for the rest of their life.
10. Do you have to pay a Separate Deductible or Access Fee for each hospital admission or for each emergency room visit? For example, some plans, like the Assurant Health's "CoreMed" plan have a separate $750 hospital admission fee that you pay for the first 3 days you are in the hospital. This fee is in addition to your plan deductible. Keep in mind that many plans have benefit "caps" or "access fees" for out-patient services, such as, physical therapy, speech therapy, chemotherapy, radiation therapy, etc. Benefit "caps" could be as little as $500 for each out-patient treatment, leaving you a bill for the remaining balance if the fee for that particular service exceeds $500. "Access fees" are also additional fees that you are required to pay per treatment. For example, for each outpatient chemotherapy treatment, you may be required to pay a $250 "access fee" per treatment. So for 40 chemotherapy treatments, you would have to pay 40 x $250 = $10,000. Again, these fees would be charged in addition to your plan deductible.
Now that you have read the list of questions that I ask a prospective health insurance client, ask yourself:
How many questions you were able to answer?
If you were not able to answer all ten, don't be discouraged. That does not necessarily mean that you are not a smart consumer. I am sure you comparison shop for everything else. Maybe you were just extremely confused by all of the insurance terminology or you had a "bad" insurance agent who did not take the time to really explain the type of coverage you were purchasing.
So how would you know if you dealt with a "bad" insurance agent? Because a "great" insurance agent would have taken the time to help you really understand your insurance benefits and s/he would have answered all of your questions about your health plan purchase BEFORE you signed on the dotted line.
Remember, insurance agents are not different from any other professional. There are "great" insurance agents and brokers that care about clients and offer exceptional customer service, and then there are "bad" agents that avoid answering questions and typically don't return phone calls when clients leave messages about unpaid claims or skyrocketing health insurance premiums.
Q. How do you know if you have a "great" agent?A. A "great" agent will recommend a health insurance plan based on all four variables; wants, needs, risk and cost. A "great" agent gives you enough information to weigh all of your options so you can make an informed purchasing decision. And, lastly, a "great" agent looks out for YOUR best interest and NOT the best interest of the insurance company.
Another way to tell whether or not you have a "great" or a "bad" insurance agent is to determine how many of the ten questions you were actually able to answer without looking at your health insurance policy.
If you were able to answer all ten questions, you have a "great" insurance agent.If you were able to answer at least seven out of ten questions, you probably have a "good" insurance agent.
But, if you were only able to answer a few questions or less than seven out of the ten, you most likely have a "bad" insurance agent.Always keep in mind that your health insurance purchase is just as important as purchasing a house or a car, if not more important. So don't be afraid to ask your insurance agent a lot of questions to make sure that you understand what your health plan does and, more importantly, does not cover.
If you don't feel comfortable with the type of coverage that your insurance agent suggests or if you think the price for the plan is too high, ask your agent if s/he can select a comparable plan so you can make a side by side comparison before you make a purchase.And, always make sure that you read all of the "fine print" in your health plan brochure and please remember to take the time to read through your policy during your "10-day free look period."
Remember, if you don't understand something, or aren't quite sure what the asterisk (*) next to the benefit description really means in terms of coverage, call your insurance agent or contact the insurance company directly to ask for further clarification. Furthermore, make sure you take the time to perform your own research on the Internet.
For example, if you research Mega Life and Health and Midwest National Life insurance company, endorsed by the National Association for the Self Employed (NASE), you will find out that there have been multiple class action lawsuits brought against these companies since 1995. Many health insurance companies, especially the ones that have to pay huge insurance fines often change their name and target more unsuspecting consumers. In fact, today these companies are selling health insurance under the name "Health Markets."
So please perform your own due diligence and ask yourself, "Is this a company that I can trust to pay my health insurance claims?"
Additionally, find out if your agent is a "captive" insurance agent or an insurance "broker."
Why?
"Captive" insurance agents can only offer ONE insurance company's products. In contrast, an "Independent" agent or insurance "Broker" can offer you a variety of different insurance plans from many different quality carriers.
Over the years, I have developed strong and trusting relationships with my clients and I am constantly developing new clients through existing client referrals. This is partly because of my level of insurance expertise and primarily due to the level of personal service that I provide.
Because personal service is extremely critical to building long-term client relationships, this is the main reason that I caution people to be very careful when using online quoting engines and online applications to buy health insurance on the Internet.Again, in my professional opinion, there are too many variables to consider when shopping for health insurance. Therefore, I am a firm believer that a health insurance purchase requires the level of expertise and personal attention that only an insurance professional can provide. And, since it does not cost a penny more to purchase your health insurance through an independent agent or broker, my advice to you would be to use Ebay and Amazon for your less important purchases and to use a knowledgeable, ethical and reputable independent agent or broker for one of the most important purchases you will ever make....your health insurance policy.
Lastly, if you have any concerns about an insurance company, contact your state's Department of Insurance BEFORE you buy your policy. Your state's Department of Insurance can tell you if the insurance company is registered in your state and can also tell you if there have been any complaints against that company that have been filed by policyholders.
Also, if you suspect that your agent is trying to sell you a fraudulent insurance policy, for example, you have to become a member of a union to qualify for coverage, or s/he isn't being honest with you, your state's Department of Insurance can also check to see if your agent is licensed and whether or not there has ever been any disciplinary action previously taken against that agent.In closing, I hope I have given you enough information so you can become an INFORMED insurance consumer and you can understand "Why The Best Policy Is A Great Agent." Whatever decision you make in regards to your health insurance, please always remember to heed the following words of wisdom.
- "If it sounds too good to be true, it probably is!" ..........and
- "If you only buy on price, you get what you pay for!"
