Monthly Archives: October 2008

Why should I have health insurance? I am young, healthy and take no medications.


It’s understandable in a tight economy that many young adults today do not find value in having health insurance.   The odds are in your favor that if you don’t have health insurance and save your premium that you’ll be ok.   The odds are also in your favor if you play Russian roulette.  Neither are good ideas.   Both have serious consequences.   Those who go uninsured are also doing a disservice to the health of the healthcare in the economy.   You are closing your eyes to a clear and present danger that will result in someone else having to take care of your obligations.    


Most young adults in their 20’s, who’s parents did have health insurance, probably grew up seeing their parents pay $5 here, $10 there, and most parents don’t even know what uninsured healthcare costs are.   Even if your insurance pays $0 on a claim, your insurance probably saved you 50% or more.   If you don’t have health insurance, your provider will charge you the retail rate for the procedure. They are required to do so.  A broken rib and trauma costs an average of $11,000 for treatment, but the average PPO discount brings down the gross cost to $3,700.  (source: VIMO, 10/2/08)  Hepatitis can cost you $18,000 in the first few days, and then $20,000 in drugs.   Young adults, while least likely to have expenses, also benefit from much lower premiums.  In most areas, a healthy young adult can get a high deductible health plan for about $2 per day.   After you tear up your knee, or have an unexpected illness is not the time to complain about getting insurance.   


It is our opinion that sometime before 2012, you will be required to have health insurance.  If you don’t get it while you can, you may pay much more for it in the future.   

What is a pre existing condition and why do health carriers worry about this? When Applying for coverage, do I need to tell the insurer or the agent about a medical issue, and what can happen if I don’t?


The dreaded ‘preexisting condition clause’ is huge implied threat to most people getting new individual coverage.   We all fear it and most don’t really understand it.  Facing it and dealing with it will give great comfort.   A preexisting condition is anything you have been seen by a doctor for, taken medication for, or a reasonable person would have seen a doctor about.   If you take high blood pressure medication, you are treated daily, even if you blood pressure is normal.   If you had bronchitis six months ago, it’s a preexisting condition.  These are just a few examples.  


Individual carriers ask lots of health questions when underwriting you so that they can get a full understanding of your preexisting conditions.   All of us have had one thing or another.  That’s normal.  They just want to know if you are a greater risk than most.   Every carrier varies in their underwriting standards and what may be unacceptable to one carrier, is acceptable to another.  Working with an agent that has access to multiple carriers and disclosing your health history to them, gives you a better chance of finding adequate coverage.  


While you may know about the preexisting condition clause, you may not be as familiar with the rescission clause.   A health carrier is given a period of two years to contest your eligibility for coverage.   If you fail to disclose a medical condition on an application, an insurance company that learns of the condition that if they knew about at the time of application, and it would have caused them to deny or exclude your coverage, the carrier may retroactively cancel coverage.  Imagine that you didn’t want to tell the insurer that you hurt your back 5 years ago, and that you had a blown disc in your back, it had caused you no issue in those five years, but that carrier would not have taken you if they knew about it.   They learn of it after you have a heart attack, by accident.   The carrier would be entitled to deny your claim for the heart attack and cancel your coverage back to the day you started.  It’s not common, but this sort of stuff happens all the time.    The sad part is that if you had disclosed this originally, your broker may have found you a different carrier that didn’t care about your old back injury.  


Some of the nationally known health carriers offer you an incentive to tell them about your health history.  They will waive the preexisting condition clause for anything you mention on your application.   So even if you take High Blood Pressure medication, they will cover it from day 1.   As in life, honesty is the best policy. 

Why are expectant fathers not eligible for health coverage with individual coverage?


Many people don’t realize that MEN can be declined for being pregnant.  No, we aren’t talking about something on the Oprah show, we are talking ‘average Joe’.    If you are about to be the father of a yet born child, you are not insurable.  


Even if you are not married, if you are the father of a newborn, your insurance company is mandated to accept the addition of that child to your health plan as long as you add the child within 30 days of the birth.  That unborn child will be in the hospital at the time of birth. That unborn child may be a few hundred dollars of his/her own expenses, or could be hundreds of thousands, and a lifetime of medical bills.   Most people recognize that if they told their insurance company that they were having an MRI in a couple of months to see about a knee problem that the insurance company would want to wait until after the MRI results are in. 

If the knee is fine, they will take you then.   Same thing applies to the expectant father.  The insurance company will not take on a unquantified risk.  

Why should I choose an HSA plan over a PPO copay plan?

One of the great manipulations of behavior was the trend in the 80’s for insurers to provide copay for office visits and prescriptions.   You have been duped by insurance companies.   The cost of that dupe is hard to calculate but is massive.    When you buy 1st dollar benefits with a copay, you are paying $1 for two quarters.   The same is true as you buy your deductible down from a medium number like $500, down toward $0.


It’s easiest to answer the question by illustrating a real life example using a family of 4 (33m, 33f, 2 kids) living in Suburban Chicago, that are healthy non smokers, no maternity.    The cost for a $0 deductible, 80/20 plan, with a $20 office copay and an Rx card costs $962 per month from a well known carrier.  The same plan with a $500 deductible, all other benefits being the same costs $793 per month. That’s a premium difference of $169 per month or $2,028 per year.    In this example, the worst case, WORST case, is that 3 members of the family have an extra $500 of risk.  Worst Case.   Why pay $2028 for $1500 worst case?   You tell me.   Now that same family can get rid of the Copay’s and Rx card, have all their expenses go towards 1 family deductible of $3500, then all the same benefits are covered at 100%.   The cost for this plan is $413 per month.   Compared to the $0 deductible, that’s more than $6500 in premium savings.  


Now go an take $3500 of your premium savings, put it into an HSA trustee account, to pay all your annual healthcare expenses. Once you have used up your HSA account, your insurance pays 100%.   If you don’t have the expenses, the money stays with you.   Keep in mind, the $0 deductible plan had Copay’s for office visits, drugs, etc.. and if you had a major expense, you still had a $1000 of coinsurance per person.  


If you are young or single, the premium savings are not so obvious.  Young males in particular are not well served by choosing an HSA. Families are almost always a better value with HSA. 


When looking at a health plan, do this calculation:  

1) What is my annual premium?   

2) What is the most that I can spend if everyone has a major procedure?  

3) What will it cost me for what I expect to have in healthcare expenses?  

4)  Am I prepared to save my savings in choosing a plan without copays?  

 Balance those and you’ll make the right choice. 


Why are there waiting periods for maternity with private insurance?

This subject again deals with perception versus fact.   In the employer sponsored healthcare market, maternity is never a preexisting condition.  If you never had insurance in your life, and got a job with benefits, and you were 8 ½ months pregnant, you could not be turned down, and your childbirth expenses would be covered.  In the individual plan market, if you or your husband were expecting a child, you would be declined.   Even if you are not pregnant and we approved for medical coverage with optional maternity benefits, you would most likely be subject to a waiting period for benefits to begin.   The benefit can be on a scheduled or limited benefit period, a waiting period for conception, or no coverage until a certain amount of time has passed.     Many individual carriers offer no coverage at all for maternity.   Even with all these limitations the cost for the optional benefit is very expensive.


Those that are likely to buy coverage for maternity are generally actively trying to have children.  The great majority of people that buy this coverage will be successful in conceiving a child, and thus the cost for insurance is prepaying for a successful outcome, plus the insurance company takes on a series of risks that can be cost prohibitive.   Aside from complications like a C-section at delivery, there are the unspoken risks and costs associated with multiple births, preemie deliveries, or other significant issues that can cost an insurer well into the six figures.  It’s not the delivery expenses that an insurer is trying to avoid; it’s the unexpected six figure expense as well as being responsible for children with congenital issues.  To dis-incent you from choosing them as a carrier, carriers make maternity benefits a prohibitive purchase. 


Both of the Presidential candidates have talked a big game about healthcare changes, but no “Hillary-type” plan is in the works.  Unfortunately, the only way that all of us will save on healthcare, is if every American is required to have s

How would “Universal HealthCare” change the current system?


We hear from lots of clients that ‘they can’t wait for a national healthcare system’.  Those that have experienced federal healthcare aren’t so sure.  A great example of a Federal healthcare experiment is Medicare Part D, the new drug coverage offered in 2006 for the first time.   This simple concept: to help seniors pay for their drug costs is so complex that it has kept even millions of low income people from even enrolling.   One can argue that leaving it in the hands of private insurers to administer and compete in the marketplace makes a decent argument for wiping private insurers off the landscape, but complete nationalization of all insurance is not anyone’s politicians radar.  Since healthcare is one of the leading employers in the country, it’s highly unlikely that it could even be accomplished.   

Most of us believe that in a Universal healthcare system would cost us less money than it does now.  Statistically, this looks to be inaccurate. Using the old 80/20 rule, 80% of the expenses in the country are expensed by 20% of the people.  In a true Universal plan, we would all share the expenses equally.  Thus, 80% of the people would spend more for our healthcare in total; it would just be collected differently.  The most likely scenario is a mandate to the 45 million uninsured that they must be insured.  It does seem likely that a combination of employer mandate and personal tax credit might pass.  While no answer seems to be a great answer, the cost of forcing the uninsured into a managed healthcare system subsidized by taxation of the rest of us, would most likely lower the cost of coverage for those that do have insurance by more than the cost of taxation.  Look for expansion of Health Savings Accounts in any legislation giving each of us some personal control of our own healthcare costs and choices.

Why is group coverage guarantee issue, while individual coverage is underwritten?

In 1996 Congress passed several significant health legislation bills.  The Kennedy-Kassenbaum bill was the most significant change in the U.S. Healthcare system since Medicare was introduced in the 1960’s.   The KK bill mandated, amongst other things, that all group insurance would be guarantee to issue regardless of health conditions.  Prior to this legislation, even group insurance was not guarantee to issue.  The legislation also provided that each State must provide avenues to insure guaranteed availability of insurance, at a reasonable cost, to all individuals seeking coverage.    This legislation allowed each State to adopt variable pricing mechanisms and guidelines so that insurance companies were somewhat protected by an anti-selection process.  Over the past 12 years, the original legislation has been modified and enhanced several times to try and meet market needs without driving insurance competition away.  


In most States, the premium costs for individual insurance is lower, sometimes significantly, than group coverage.  The myth still exists with many, that somehow group coverage is cheaper.  It’s not.   Group coverage, even for healthy groups, is generally more expensive than individual plans.   Individual insurance carriers are allowed to thoroughly look at applicant’s histories and can turn down applicants. What is no big deal in a group plan can be a significant obstacle with individual plans.   Many individual carriers will decline to offer coverage to 20-35% of applicants.  Many carriers offer plans that can add premium from preferred rates to account for the risk or can exclude conditions from coverage.   Having a good agent who has access to multiple carriers and who asks you a lot of questions about your health and budget are more likely to find the right plan for you.   If you are not insurable, that agent can guide you to your State’s insurance option for high risk individuals.