Your AARP Personal Guide to Buying Health Insurance. What you should know. BA9802 (3/06)

Transcription

1 Your AARP Personal Guide to Buying Health Insurance What you should know. BA9802 (3/06)

2 A word from AARP Health Care Options AARP Health Care Options is happy to offer you this personal guide to buying health insurance. We are committed to being a source of user-friendly health information for people age 50 and over and to making products available that can help you stay healthy. Even if you don t purchase health insurance through AARP Health Care Options, we want you to make an informed decision, for your own good health. Buying health insurance can be confusing, so this guide will help you understand some of the issues involved. You ll find questions to ask insurance companies before you buy, as well as a glossary of insurance terms. Throughout, you ll also find the story of Alice, someone who needs to buy her own health insurance for the first time. We hope her story will give you insight on how to purchase individual health insurance. Table of Contents Starting Out Page 2 Coverage Page 3 Pricing Pages 4 5 Research Checklist Page 6 If You Can t Qualify Page 7 Comparison Worksheet Pages 8 9 Glossary Pages Notes Pages AARP Health Care Options is the name of AARP s health insurance and service program. It is not the insurer. 1.

3 1. What you should know starting out There are some major differences between group health insurance that you typically get through an employer and health insurance that you buy yourself. The first is that when you get insurance through an employer, they may cover up to 85% of insurance premium costs.* Now you ll be paying the entire premium (the monthly bill) yourself, so the cost may surprise you. Also, you don t just pick a health insurance plan and enroll. The plan has to accept you. If you are more at risk for health issues (or even have current health issues), getting coverage can sometimes be challenging. That aside, the process may seem familiar. You ll still encounter deductibles and co-pays. There are comprehensive (major medical) and catastrophic plans. This handbook explains them all in more detail, but if you re confused by any of these terms, there s a handy Glossary in the back. Ultimately, the plan you choose should fit your needs for both benefit coverage and budget. Meet Alice. She s 55 and ready for Health Insurance 101. When Alice decided to start her own business, she didn t know what she wanted to do about health insurance. She knew she could continue her current health coverage for 18 months through COBRA (for more on COBRA, see the Glossary). I have 63 days to decide if I want COBRA, so I think I ll investigate buying my own health insurance it might be less expensive. One thing s for sure, I don t want to go without health coverage. It s just too big a gamble. 2. *The 2005 Kaiser Family Foundation (KFF)/Health Research and Educational Trust (HRET) Annual Employer Health Benefits Survey. Figure based on single coverage.

4 2. What you should know about coverage Once you start shopping for your own health insurance, you ll find a choice of plans and coverage. Types of insurance. Traditional fee-for-service health insurance plans allow you to use any provider you d like and are typically the most expensive kind of plans. HMOs (Health Maintenance Organizations) and PPOs (Preferred Provider Organizations) offer reduced costs as long as you use network doctors. See the Glossary for more details. Types of plans. Comprehensive (major medical): This type of plan usually covers hospital visits, surgeries, doctor s visits, routine lab exams, preventive care like pap smears, prescription drugs, and more. It typically has a deductible that you must pay before the plan begins paying benefits. Catastrophic (limited coverage): If you want a lower monthly premium, you may decide on catastrophic coverage, which usually covers hospital stays and surgeries in the event of a major illness but often doesn t cover doctor appointments, preventive care, or prescription drugs. Also, deductibles will be higher. Hospital-Surgical: Another way to keep your premiums low, these plans pay toward the expenses related to hospitalization, which are typically room and board plus doctor charges. Short-Term: This is coverage that lasts for a specified length of time. For example, if you know you re going to be between jobs for a few months, you might buy a six-month term policy with major medical coverage. Be aware this type of plan typically does not cover pre-existing conditions, and many companies may limit you to one renewal. Services that enhance coverage. Many insurers also offer health care resources as part of their coverage services that help you find physicians, learn more about health and wellness, access 24-hour assistance from registered nurses even order prescriptions online. Make sure you ask if they offer resources like these to help you manage your health. Catastrophic or comprehensive? What s best? Alice soon discovered she had a choice between catastrophic (limited) and comprehensive (major medical) coverage. I spend a lot on prescriptions because of my asthma, thought Alice, and there are doctor s visits for my allergy shots, plus my pap smears and mammograms, not to mention my yearly checkup. I might consider catastrophic coverage because it s a good safety net just in case something major happens. But I think I m going to go with comprehensive coverage preventive care is important to me. 3.

5 3. What you should know about pricing The monthly cost may surprise you. If you ve ever had health insurance through an employer, they probably paid for most of it as was mentioned earlier, the average employer covers up to 85% of all employee insurance costs.* Now the total premium will be your responsibility. (On the plus side, if you are self-employed, your health insurance premiums may be tax deductible.) Also, with employer-sponsored plans, there are usually lots of healthy people to offset the claims of people who get sick. With individual health insurance, your enrollment application is reviewed through a process called underwriting to determine if you qualify for coverage and what you ll pay. Underwriting evaluates how healthy you are now and calculates the likelihood of your needing medical treatment in the future. Good health matters. The bottom line is this: Insurers charge lower rates for people who are healthier. Some companies will add a surcharge for insuring a person with potentially expensive medical conditions it s called rating up. You might be rated higher because you re a smoker, or because of an ongoing condition like asthma. And many companies deny coverage to people with serious illnesses like diabetes and cancer. Fortunately, insurance companies may only review your health history for existing health conditions once when you first apply. Of course, if you change companies or want to increase your coverage, your health history may be reviewed again. Look-back periods. When you apply, you ll be asked questions about your health history during the company s look-back period. Different insurance companies have different lookbacks they usually range from three to ten years. A shorter look-back period may be better, especially if you ve had some health issues. Based on what s happened during your look-back period, you ll either be accepted, accepted with pre-existing conditions waivers, or denied coverage. My kidney stones could come back to haunt me. Nine years ago, Alice had a series of kidney stone attacks and an operation to remove them. If I have to report the operation on my application, it might affect my acceptance or the cost of my coverage, she thought. I ll look for a company that has a shorter look-back period f ive years or less.then I won t have to worry about it. 4. *The 2005 KFF/HRET Annual Employer Health Benefits Survey. Figure based on single coverage.

6 Waivers for pre-existing conditions. If you do have a pre-existing condition, companies may put a waiver in your policy excluding coverage for that condition for a certain period of time. If you have asthma, for example, coverage may be excluded for a year or two or permanently. Waiver policies vary, so if you have a pre-existing condition, be sure to ask the insurance company how they ll handle coverage for that condition before you apply. Evaluating rates. Everyone wants to find the least expensive health insurance. And while lower rates may initially be more attractive to you, less-expensive plans may not offer the specific types of benefits you need. You may notice higher rates for plans that offer additional benefits, such as prescription drug coverage and preventive care. That s why it s important to thoroughly review all of your insurance options. It s also important to understand how your rate is determined and when and why rates will rise. Your rate is usually first established based on your health history and age. Some companies require exams to determine your current health, while others ask questions to review your health history. Once a company sets your rate, your rate will increase based on a number of factors. Generally, companies raise rates each year due to the rising cost of health care more advanced procedures, better drugs, etc. Keep in mind, your rate will also likely increase as you get older. Be sure to ask companies when and why rates increase. These rates aren t that bad after all. I used to receive my coverage through my employer and only paid $51 a month. Once that ended, I had to look for my own coverage. Boy, was I surprised by the rates.they were so much higher than I had been paying. I looked into it a little more and found out that my employer had actually been picking up $284 of my monthly premium for me. I had no idea my company contributed so much.the rates I m seeing now suddenly make sense. 5.

7 4. Your research checklist Now that you understand a little bit more about how individual health insurance works, it s time to start looking for a policy. These questions and the worksheet on pages 8 and 9 can help you find the right balance between coverage and cost. Find the best coverage and I have to think of the future. plan for your needs. How s your general health? If you tend to get sick a lot, look for a plan that covers doctor s visits and prescription drugs. Do you have a doctor or hospital you prefer? If you choose a PPO or HMO, make sure those providers are in the insurance plan s network. Do you regularly take any medications? A plan that covers prescription drugs can help. Add up your annual prescription costs to down the road I may determine if the plan will meet your needs. want that kind Is preventive care important to you? of security. Your annual checkup, blood work, mammograms, and other diagnostic tests are more likely to be covered under a comprehensive plan. How you can keep costs down. Are you in great health and want a lower monthly bill? A catastrophic plan with limited coverage may be the right choice just remember you ll probably be paying for all of your preventive care yourself. And if your medical needs change later on, you may not be eligible to change to a comprehensive plan. Would you be willing to go with a higher deductible to save money? Some people would rather pay a higher monthly premium to avoid a big deductible payment. Others would rather pay less in monthly premiums because they have the cash reserves to afford a substantial deductible. Are you willing to use network hospitals and doctors to save money? Consider a PPO (which gives you a choice between network and non-network providers) or an HMO (which may limit you to network providers only). Remember, with an HMO, you may have to get a primary care physician s permission first (a referral) to see a specialist (see the Glossary on pages 10 and 11 for more on HMOs). 6. I have quotes from two insurance companies, thought Alice. I m on a tight budget, but the plan with the lower rate doesn t offer prescription drugs or preventive care. I could get the low rate for a year then switch but what if I get sick? Then other insurance companies might not accept me. Sure, I m healthy now, but if I get sick

8 5. What to do if you can t qualify If you re having trouble finding insurance because of a pre-existing condition, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) may help. HIPAA laws vary from state to state, but many states restrict the ability of insurers to exclude pre-existing medical conditions from coverage if you were previously part of a group plan, paid your own premiums for COBRA coverage, and applied for new coverage within 63 days after having left the group plan.to learn more about the HIPAA regulations for your state, visit Alice did her homework. As she compared plans,alice thought, I want a plan that is affordable and offers me the coverage I need so that I can stay healthy while I focus on my new business. Alice looked at plans that offered comprehensive coverage so that her allergy shots, asthma prescriptions, checkups, and routine doctor s visits would be covered. She reviewed the premiums, deductibles, co-pays, and co-insurances, as well as exclusions for pre-existing conditions. After careful consideration, Alice ended up choosing a plan that cost her a little more but gave her the benefits and security she really wanted. She thought, Now that I have my health insurance taken care of, I can start working on my future. Use the Comparison Worksheet on the next page to start exploring your coverage options. > 7.

9 6. Comparison Worksheet Call at least three insurance companies and get information on several plans with varying coverage and deductibles. Get preliminary quotes based on different health levels you don t know how a company will rate your health, so get a range of prices. And don t forget to call your state department of insurance for complaints and rating reports. General Questions AARP PHIP* Provider B Provider C What kind of network and plans do you offer? (Make sure the choices available are right for your needs.) Will I be required to get referrals from my primary doctor to see a specialist? (You will have more flexibility if referrals are not required.) Do I have to take a health exam or submit lab tests to apply for this insurance? (Tests and exams indicate that a policy is harder to qualify for. Look for plans that minimize these requirements.) Are there any medical service limits, exclusions, or pre-existing conditions that will affect me? How long is the look-back period for pre-existing conditions? (A shorter look-back period may be better; page 4 has details.) What is your company rated by Standard & Poor s and A.M. Best Co., Inc.? (Look for a company rated A or higher ratings are indications of financial stability, so you ll know the company will be around to pay your claims.) Coverage Questions AARP PHIP* Provider B Provider C How much is the annual deductible? After the deductible is met, what co-insurance applies (90/10, 80/20, etc.) for benefits and/or prescription drugs? How much is the annual maximum out-of-pocket cost to me? How much is the monthly premium? (Make sure the premium meets your budget and the plan meets your current and future coverage needs.) 8. *AARP Personal Health Insurance Plans are insured by United HealthCare Insurance Company.

10 Coverage Questions (continued) AARP PHIP* Provider B Provider C What is the maximum lifetime benefit I can receive? (We suggest that you don t go with anything less than one million dollars.) What types of pre-authorization or certification procedures are included? Will my rates go up if I file lots of claims? Can I be singled out for a rate increase for any reason? ( No is the preferable answer.) Can you cancel this policy for any reason except non-payment of premium or fraud? (Again, no is the preferable answer.) Benefits Questions AARP PHIP* Provider B Provider C Inpatient hospital services/outpatient surgery Physician visits (in the hospital) Office visits, preventive care, and checkups Prescriptions Medical tests and X-rays (radiology) Skilled nursing care Mental health care/substance abuse Home health care visits Rehabilitation Hospice care Chiropractic treatment Other covered services Services and Discounts Questions AARP PHIP* Provider B Provider C Do you have any services that can give me more control over my health decisions? (e.g., physician/treatment locators, health and wellness information, etc.) What discounts are available that can help me lower my costs? (e.g., prescription drugs, eye care, etc.) 9.

11 7. Glossary COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985): Some employers are mandated by law to offer employees who have been let go the option to continue their health coverage for up to 18 months. The employee will pay the full premium, up to 102% of the employer s cost (the extra 2% is the administration fee). You have 63 days to enroll, and when you do, coverage is retroactive. Remember, COBRA covers ALL members of your family from the date of termination, so if your spouse has a pre-existing condition that a new, cheaper policy might not cover, you can elect to keep COBRA for him or her. If you re considering COBRA, be sure to get more information from your employer and remember, coverage only lasts 18 months. Deductible: The amount you have to pay for medical services before your insurance company begins paying benefits. Typically, the higher your deductible, the lower your monthly premium. Co-insurance: These are costs you pay after you ve met your deductible. Co-insurance is usually a percentage of medical expenses. For example, many insurance companies pay 80% of medical costs and ask you to pay the remaining 20% that 20% is your co-insurance. Co-pays: Co-pays are usually fixed amounts you pay for a product or service, like a $10 co-pay for doctor s visits or prescription drugs. Often, co-pays are unlimited. For example, even if you ve met your deductible, you ll still have a $10 co-pay for doctor s visits. HMO (Health Maintenance Organization): Typically, this is the least expensive health insurance option, but you may be restricted to using doctors in the HMO network, or the HMO won t pay. In addition, you must choose a primary care physician and you may need that physician s permission first (a referral) to see a specialist. HSA (Health Savings Account): The health savings account (HSA) is a tax-advantaged savings plan (a financial account with various restrictions) that helps cover current and future medical expenses. Look-Back Period: When you apply for health insurance, you must report any medical conditions for which you have been diagnosed or treated during the look-back period. For example, if a company has a three-year look-back period, you have to report conditions that you had treated in the last three years. Based on your answers, you ll either be accepted, denied, or accepted with a pre-existing condition waiting period the time you must wait before your pre-existing conditions can be covered. 10.

12 Medical Trends: The rate at which medical costs are increasing due to services being used more frequently; an increase in the costs for these services; and/or more expensive services being used. Out-of-Pocket Maximums: After you meet your deductible, this is the most co-insurance you can pay in a single year. Out-of-pocket maximums may or may not apply to small co-pay amounts. Pre-existing Conditions: Any physical or mental conditions that you ve been diagnosed or treated for prior to the effective date of health insurance coverage (the day your coverage begins). Premium: The amount you pay for coverage, usually paid in monthly installments. Primary Care Physician: A primary care physician provides, coordinates, or arranges for care to patients, and takes continuing responsibility for providing a patient s care. PPO (Preferred Provider Organization): This health plan option allows you to use in-network and out-of-network doctors, though you ll pay more if you use out-of-network doctors. You do not have to get a referral before seeing a specialist. There is typically a deductible, and you will also probably be responsible for a portion of provider bills (plans often pay 80%; you are responsible for 20%). Referrals: The recommendation by a physician and/or health plan for a covered person to receive care from a different physician, specialist, or facility. Specialist: A physician who has completed an approved residency, passed an examination given by a medical specialty board, and has been certified as a specialist in a medical area. Traditional Fee-For-Service Health Plans: The most flexible and usually the most expensive health plans. You may use any provider you want. There is typically a deductible and co-insurance (plans often pay 80%; you are responsible for 20%). In addition, these plans usually only pay for reasonable and customary medical expenses. If your doctor charges more, you will have to pay the difference. Underwriting: This is a process insurance companies use to evaluate the costs of insuring you and determining if you re eligible for coverage. It can involve asking medical questions or requiring health exams. If you are eligible for coverage and multiple rate levels exist, your rate level will be assigned based on this underwriting. 11.

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