Five Ways To Get Individual Health Insurance

Transcription

1 Five Ways To Get Individual Health Insurance Provided to you by: Daniel R Chen FPA

2 Five Ways To Get Individual Health Care Written by Financial Educators Presented by Daniel R Chen FPA Securities and Advisory services offered through Cetera Advisors LLC, Member FINRA/SIPC. Cetera is under separate ownership from any other entity. No investment strategy can eliminate the risk of fluctuating prices and uncertain returns Update v.5.0

3 Introduction: Most people with private health insurance get coverage through their employment or the employer of a spouse or parent. Employer sponsored health insurance is most popular because it usually offers the most comprehensive coverage and it is subsidized, with employers and tax breaks paying some or most of the premium for you. Others who own their own business, work in a position without health benefits, work part-time, or don't work at all, must select and buy their own coverage in the individual health insurance market. According to the Center for American Progress Action Fund, 14 million Americans own an individual health policy as of March Seeking individual health insurance is not made simple by the government or the insurance industry (not so for retirees where the Medigap plans have been standardized). The difficulties include: Heath insurance policies with gaping holes offered by insurers ranging from small companies to brand-name carriers, and in most states, regulators are not required to analyze overall coverage. Disclosure requirements about coverage gaps are weak or nonexistent. So it's difficult for consumers to figure out in advance what a policy does or doesn't cover, compare plans, or estimate their out-of-pocket liability for a medical catastrophe. It doesn't help that many people who have never been seriously ill might have no idea how expensive medical care can be. People of modest means in many states might have no good options for individual coverage. Plans with affordable premiums can leave them with crushing medical debt if they fall seriously ill, and plans with adequate coverage may have huge premiums. Although you can buy insurance online, many people use an agent to help them find coverage because of the difficulty in comparing policies. The difficulty in comparing one plan to another is due to differences in features which are not easily compared. Experienced agents understand these differences. This booklet provides as much information as possible in the space provided so that you can make a good choice. Know that health coverage differs from area to area, so the coverage that your brother has 100 miles away may not be available in your area. 3

4 How to Select a Policy These are the elements you want to review before you buy a policy and determine what is covered and how much of each: Hospital and doctor care Lab tests Medical equipment Prescription drugs Rehabilitation following illness or injury (for example, physical therapy) Mental health care If you have several drug prescriptions, you want a policy that offers very comprehensive coverage for brand name and generic drugs with a low deductible (explained below). This coverage will generally make the policy more expensive. If you take few or no drugs, you can opt for a policy with less drug coverage and save money. So you can see that first knowing which elements above may be important for you is important in deciding which tradeoffs to make to control the cost of your coverage. If you are generally healthy and want health insurance in case of a medical catastrophe, then you want to make sure you have a plan with a high coverage limit, say $5 million. Many policies stop benefits at $1 million, which in today's environment may not cover the lifetime of costs for a serious condition. Knowing which of the above elements are most important to you can help you screen out many policies which don't fit your desires and help you compare those that do. Maybe most important is that the policy be non-cancellable, guaranteed renewable coverage -- this means that you cannot be cancelled as long as you continue to pay the premiums and do not try to defraud the insurance company. The last thing you want is to have an insurance company cancel your coverage when you most need it. Plan Flexibility Before you consider the previous choices, the most important decision is how much flexibility you want within your health care. You have these basic choices: Individual Health Insurance Options You have several choices for individual health insurance: Fee-for-Service Insurance Managed Care Plans Open Enrollment in Managed Care Plans Association-Based Health Insurance High-Risk Pools Fee-for-Service Insurance A fee-for-service insurance policy (also called indemnity insurance) is a traditional kind of health insurance. It pays a part of each medical service you get, such as doctor visits or hospital stays. You pay the rest of the cost. You can go to any doctor or hospital you choose. The premiums on this type of policy are reasonable but your out-ofpocket costs are unlimited. If the payment under the policy is $25,000 for a heart bypass operation and the actual costs are $75,000, you're stuck with $50,000 of uncovered expenses. 4

5 Managed Care Plans Many people get health insurance through a managed care plan, such as a health maintenance organization (HMO) or preferred provider organization (PPO). In managed care plans, health insurance companies contract with doctors and hospitals to provide health care to its members. These doctors and hospitals make up the plan's network. In managed care plans, you may only be able to see the doctors and hospitals that are part of the plan's network. Some plans, like PPOs, allow you to use doctors and hospitals outside the plan network, but you usually pay more. So if you are set on using specific physicians and they are not in the network, you may pay handsomely for each incidence of care. In HMOs, your visits to the doctor are pre-paid by the plan. You only pay a small copayment, for example, $10 to $50, each time you visit the doctor, and typically $10 to $30 for each drug prescription refill. HMOs can be a "one stop shop" if all of the physicians are under one roof or within one complex. You can get everything done, from x-rays to lab work to even surgery in one location. You trade great convenience for less choice, and usually have a lower monthly premium than with a preferred provider organization. Open Enrollment in Managed Care Plans Some states require managed care plans to have an "open enrollment" period each year. Open enrollment usually is a one-month period during which managed care plans must let people join, even if they have an ongoing, serious medical problem. This can be a very helpful option if you have not been able to get health insurance because of a medical problem. You can sign up for a managed care plan during an open enrollment period without having to get medical exams to prove you can be insured. A few states require insurance companies to offer their plans to people who have not been able to get health insurance because of their health. This option can apply to more types of health insurance than just managed care plans. In these states, health insurance costs more for everyone, as the insurance companies are forced to take on "bad risks", i.e. people with existing health problems. Association-Based Health Insurance You might be able to get health insurance through a trade or professional association. Many professional, community, and religious organizations offer their members health insurance coverage at group rates. If you are a member of any trade or professional association, ask if it offers health insurance coverage. Find out: How complete the coverage is How much of your medical expenses from routine doctor visits and prescription drugs to major surgery will the insurance cover What it will cost each month If it covers family members High-Risk Pools You may not be able to get coverage because of a pre-existing condition. In states that don't force insurance companies to sell you a policy, companies will deny coverage to those with expensive illnesses. In some states, high-risk pools might be a source of health insurance for people who have not been able to get health insurance because of a serious medical condition. 5

6 High-risk pools are considered the last resort, when all other attempts at getting health insurance haven't worked out. To get health insurance through a high-risk pool: You must have been refused health insurance coverage by at least one or two insurance companies, or You could not find a health insurance plan with a monthly premium less than the monthly premium in the high-risk pool. Premiums for these policies are expensive. Other Types of Policies There are other kinds of insurance policies that should not be mistaken for comprehensive health insurance. Specific disease policies, such as "cancer policies," pay for care only for the specific disease. Hospital indemnity policies pay you a set amount of money for each day you are in the hospital. These policies may sound good but don't really help with catastrophic health care costs. You want comprehensive coverage. Underwriting - Are You Insurable? Not everyone is insurable. Your health history and pre-existing conditions may keep you from getting coverage, or you may get it at an increased price if you are viewed as a more risky case. The process of analyzing your health risk is called underwriting. Underwriting (determines your insurability and your cost) depends on your age, weight, smoking status, and health history. You may be requested to undergo a medical exam so that the insurance company can get a comprehensive view of your health and uncover issues you may be unaware of. You may find that minor issues, that don't cause you any discomfort, like asthma or treated depressions could be enough for an insurer to increase your premiums. If you are viewed riskier than the average person of your age, you are "rated" which means you are charged more than the published amounts for insurance. A plan could either be too expensive or include a rider that excludes the very ailment for which you need coverage. "If they look at your application and see something they don't like, a $600 [a month] policy could go to $850," says Robert Bland, chief executive of online insurance broker Insure.com. You should also know that health insurance is regulated at the state level. In places like New York, New Jersey and Vermont, insurers must offer coverage to every applicant, regardless of age or health status. This egalitarian approach is great for some people but by forcing the insurance companies to insure everyone, the premiums for all are higher. Even young healthy men, who are the least expensive to insure, could be charged as much as $1,000 a month, says Bland. In other states, such as California and Florida, there are fewer restrictions on the insurers, and premiums tend to be more reasonable for young people and pricier for older folks. The problem in these regions is that insurers can outright refuse to provide coverage if they don't like your health profile. In such cases, consumers can buy pricey policies from a state high-risk pool. But these high risk policies are expensive and could exclude preexisting conditions. But these high risk policies are expensive and could exclude pre-existing conditions. In no case should you leave out any details on your insurance application. Some people think they have a better chance of getting insured if they appear healthier by omitting an item on the application. While this is true, you run the large risk of having health coverage denied later if you omitted information about your health on your original application. 6

7 How to Buy It If you terminate employment and have the option to sign up for COBRA (a federal law that requires certain employers to provide former employees with the option to purchase health insurance), this may be a good option but do not assume it is the best option. Talk to an agent to do a comparison. While federal law requires that the policy from your employer must be made available to you for 18 months (up to 36 months in some cases), you must pay the entire premium, as your employer's subsidy will disappear if you have terminated employment. You have 60 days to decide to continue with your employer plan which gives you plenty of time to consider your options. You may be surprised to find that when you now have to pay the full cost of insurance without your employer's subsidy, that an individual policy will be less expensive. The quickest way to get a handle on your options is to look for policies on websites such as Insure.com or ehealthinsurance.com. If you need a little more hand holding, you should contact a local health insurance agent as, unfortunately, there are aspects to making this choice that are difficult without the assistance of an experienced professional. Just make sure you find someone who represents a lot of companies and understands the underwriting standards for each insurer. The last thing you want is to be rejected from a plan that doesn't typically cover someone with your health profile. Not only is it a waste of time, but it could also raise a red flag when you apply to other insurers and need to state that you have previously been declined. An experienced agent knows which insurance companies are most likely to insure you given your health profile. Don't forget to check with your professional trade association for coverage. The Writers Guild and the Actors' Equity Association are two examples of groups that offer their members health insurance. (In most states, however, people in their 20s and 30s may find cheaper coverage through an individual plan.) And for those starting a business, most states and plans allow as few as two employees to buy a small group policy. It may be worth considering having a small legitimate business so that you can get a group plan, as group plans typically take all applicants regardless of health profile. 7

8 The Cost These days, coverage for an individual with employer-provided insurance costs on average $4,824 a year, with the employee paying $779 of that amount, according to a 2009 survey by the Kaiser Family Foundation and Health Research and Educational Trust. For a family plan, the premium is $13,375 with the employee paying $3,515. Under current law, the Congressional Budget Office estimates that in 2016 average premiums for employer-based insurance will rise to about $7,500 for a single policy and about $19,000 for a family policy. How much can an individual expect to pay? According to American Health Insurance Plans, Nationwide, annual premiums averaged $2,985 for single coverage and $6,328 for family plans in mid While individual plans may appear cheaper than premiums through an employer plan, individuals have to pay the entire premium on their own and often tolerate higher deductibles. And as we mentioned earlier, those in restricted states, and older individuals with health issues, can expect to pay a lot more. "It's not uncommon to hear of people paying $10,000 to $12,000 a year," says Families USA's Stoll. One way to keep premiums manageable is to increase your deductible (don't go beyond what you can afford to pay out each year) and skip the vision and dental coverage. Don't even try to match your former employer's lush plan as it may not be affordable given that you pay all of the cost. Blue Cross Blue Shield of Illinois, for example, charges a young family of four living in suburban Chicago $636 a month in premiums and a $250 deductible. If they accept a deductible of $1,750, they can lower the premium to $415 a month. "Insurance should be purchased to cover sudden accidental and unintended losses," says Insure.com's Bland. "With low-deductible plans and maintenance policies, you are trading dollar for dollar with the insurance company over the long run." 8

9 While there are some benefits you can live without, others are important. A maternity rider is one of them, advises Ellen Corwin, an individual health-insurance broker from West Des Moines, Iowa. "I advise all of my female clients to get one," she says. Unlike employer-sponsored plans, which usually cover birthing expenses, private plans don't unless you pay for it upfront. Even if you decide to start a family in a few years, it may be too late to add the coverage. Blue Cross Blue Shield of Tennessee, for example, won't let a woman add the benefit after she initially purchases a policy unless she submits an official "notification of change in status" and gets married. Before we continue discussing cost, let's cover just a few definitions: Deductibles: the amount you must pay out of pocket before the insurance kicks in. Co-pays: the percentage you must pay of each medical expense up to your out of pocket limit. Out-of-Pocket Limit: the maximum you will need to pay of your own money in any one year when the deductibles and co-pays are combined. Drug coverage: whether the policy covers for only generics or name brands (and if this is important to you based on the names of the drugs you take and if the generic is available). Special coverage: which you may or may not need such as maternity. By accepting higher deductibles, higher co-pays and larger out-of-pocket limits, you reduce your monthly insurance premium. There is no "right answer" as to what these limits should be for you. But in general, if you are a frequent user of medical services, then paying more per month so that you pay less for each service will be best and vice versa. Before you make your final decision, read the fine print. Make sure you're buying comprehensive coverage that will cover you should you suddenly fall ill and rack up thousands in hospitals bills. Insurers have been known to attract customers with low teaser rates that can change after only a few months. It may cost a little more, but you should look for one that will guarantee your premiums won't rise for 12 months. And most important, go with a reputable firm. Check its claims-paying ability rating with an agency like Standard & Poor's or Moody's. It won't cost anything to get the help of an experienced health insurance agent, as the payment to the agent is already built into the premium whether you use an agent or not. Buying health insurance may not top your list of fun things to do, but that doesn't mean it's unimportant. After all, there are few things in life more valuable than protecting your health. 9

10 Health Savings Accounts - A Newer Option As mentioned previously, the way to reduce the monthly health insurance premium is to accept a policy with a higher deductible. The federal government subsidizes this choice when you use a health savings account in combination with a high deductible insurance plan. Because the deductible is high and you pay that from your pocket, the federal government allows you to save, in a special account, approximately the amount of the deductible and take a tax deduction for deposits into that account. When it's time for you to pay medical expenses, you can withdraw from this special account thereby covering your out-of-pocket health costs with after-tax dollars. Because you are at risk for the first claims (i.e., the large deductible), the annual premium of these policies is lower. As a very general rule of thumb, expect to reduce the monthly premium for health coverage from 30% to 50% using a high deductible plan. Description of HSA/HDHP Policies, Single Family Individual Market Best-Selling Product Average Annual Deductible* $2,600 $4,846 Average Annual Out-of-pocket Limit $3,661 $7,057 Average Lifetime Maximum Benefit** $3.9 Million $3.9 Million Percentage of Policies with Unlimited 21% 23% Maximum Benefit Source: 2008 AHIP HSA/HDHP Census *Policies generally cover preventative care services before the deductible is reached. ** Among plans with a lifetime maximum benefit. Enrollment in the individual market rose to 1.5 million covered lives in January 2008, up from approximately 1.1 million in January Forty-six (46) percent of all individual market enrollees - including dependents covered under family plans - were aged 40 or older. According to American Health Insurance plans, 8 million Americans have opted for this way to lower premiums by mid Is an HSA/High Deductible plan a good option for you? An experienced agent can help you compare this option with a more traditional plan. Prepare for your meeting by making s list of your medications and dosages, any hospital confinements in the last five years, and a description of your medical conditions. With this information in hand and the help of an experienced agent, you should be able to find a very suitable solution, often in one meeting. 10

11 What to Expect Here are some national statistics about individual health insurance plans so that you know what to expect in obtaining your own coverage:1 Individual coverage was held by people of all ages. Forty (40) percent of single policies were held by people aged 45-64; 37 percent were held by people between 25 and 44 years old; and 23 percent were held by people aged 24 and under. Likewise, 53 percent of family policies were purchased by families headed by people aged 45-64; 42 percent were held by families headed by persons aged 25-44; and 5 percent were held by families headed by individuals aged 24 or younger. Premiums varied considerably by state, reflecting a variety of factors, including premium rating and underwriting rules, differences in health care costs, demographics, and consumer benefit preferences. For example, average annual premiums for single policies reported in the survey ranged from $2,606 in Iowa to $6,630 in New York. Approximately 87 percent of applicants undergoing medical underwriting were offered coverage. Offer rates varied from a high of 95 percent for applicants under age 18 to 71 percent for applicants aged Twenty-nine (29) percent of offers in the survey were at standard premium rates; 36 percent were offered at lower (preferred) rates; and 34 percent were offered at higher-than-standard rates. Approximately 6 percent of offers included "condition waivers," i.e., coverage exceptions for specified conditions, and about 6 percent included a rate applicable to smokers. Standard or preferred rates were available in all age brackets. Among adults age 60 to 64 who were offered coverage, nearly three-quarters (74 percent) of offers were at standard or lower (preferred) rates. For PPO/POS coverage, the most common type of individual coverage in the survey, single policies had annual out-of-pocket limits under $5,000 on average, and family plans had average out-of-pocket limits of under $10,000 (for the whole family). The average lifetime maximum benefit (among plans with a maximum) was nearly $5 million. 1 AHIP "Individual Health Insurance 2009" 11

12 About Daniel R Chen A resident of the Monmouth County area since 1968, Daniel Chen is a graduate of Monmouth University, West Long Branch, with a BS in Psychology. Dan currently provides Wealth Management services in the four specific disciplines of Estate Planning, Risk Management, Tax Efficient Strategies, and Investment Management services via the financial planning process. His twenty years as a trader in the U.S. Treasury markets for firms including Garban LLC and Cantor Fitzgerald has provided him with an immense and diverse experience in the global capital markets. In 1999 Dan recognized the need for personalized investment advice by employees of the small business pension plan market. As a result he set about crafting a solution for this underserved population which became well received by the major stakeholders of the small business community. In recognizing the scarcity of the independent advice and research service model, he set upon designing and implementing the delivery of an individually personalized and high touch investment management process to the demands of an increasing affluent clientele marketplace. Dan is currently listed as a rated advisor in the Paladin Registry, an independent non bias third party registry that pre-screens and qualifies advisors according to their business ethics and credentials. Please go to the following link: to view his profile in greater detail. Today Dan serves a growing clientele base via a consultive process in defining and creating sound strategies for achieving their wealth management and preservation goals while collaborating with their other key advisors [i.e.; accountants and attorneys]. In addition, Dan holds insurance and securities licenses administered by FINRA and the N.J. State Department of Banking & Insurance [i.e.; Series 6,7,24 and 63]. He is also a member of the Financial Planning Association and an Associate Registered Investment Advisor (RIA) with Cetera Advisors LLC. 12

13 About DC Strategies Integrated Wealth Management Services Assisting clients in understanding where they are today can be critical in setting attainable financial and personal goals for the future. We know your hopes and dreams include sending your children to the right schools, a comfortable retirement, and financial security late in life. We are a Wealth Management firm assisting our clients in negotiating the financial barriers that invitably arise in every stage of life. Our team has the experience to help you persue these important goals. Ultimately, our greatest impact may be the confidence that comes with working with an Advisor that will educate his clients in the options that are available,and implement those strategies in simple and easy to understand terms. Phone today with questions or to see if we can help you. There is no charge for an initial meeting. Daniel R Chen FPA Daniel Chen 12 Christopher Way. Suite # 200 Eatontown, NJ

14 2010 Financial Educators First Published 11/10/09 This booklet is protected by copyright laws. It may not be reproduced or distributed without express written permission of the author. Published by Financial Educators 14