Buyer’s Guide to Health Insurance
Buyer’s Guide to Health Insurance
For Individuals and Families
Aaron E. Price
Professional Services Group
Fort Atkinson, WI
The Buyer’s Guide to Health Insurance is meant to help the consumer understand and become more comfortable with the buying process. The steps outlined are generally the steps we, at Professional Services Group, take our clients through in our office.
Please contact our office if you would like additional information regarding any section of this booklet.
I hope you find the information and tips in this booklet to be helpful.
Aaron E. Price
Professional Services Group
404 Madison Ave.
Fort Atkinson, WI 53538
Health care is changing rapidly. Twenty-five years ago, nearly all Americans had indemnity insurance coverage. A person with indemnity insurance could go to any doctor, hospital or other provider, and the insurance company and the patient would each pay part of the bill.
Today, more than half of all Americans who have insurance are enrolled in some kind of managed care plan: an organized way of both providing services and paying for them. The initial impetus for managed care was to contain costs. Increases in health care costs had far outpaced increases in inflation throughout the 1980’s and into the 1990’s. Over time, however, the distinctions between managed care and indemnity plans have begun to blur as health plans have been forced to compete on both cost and quality-of-care considerations.
Today there is a full range of health insurance choices.
I. General Information
What is health insurance?
Health insurance is insurance that pays for all or part of a person’s health care bills.
Why have health insurance?
The purpose of health insurance is to help people cover their health care costs. Health care costs include doctor office visits, hospital stays, surgery procedures, tests and other treatments and services.
Terms and Definitions
Benefit Maximum – The maximum dollar amount a plan would pay for covered medical expenses incurred during a coverage period.
Co-insurance – Refers to money that an individual is required to pay for services after a deductible has been paid. Co-insurance is often specified by a percentage (i.e. 80/20, 50/50, 70/30). Example: 80% paid by insurance company and 20% paid by individual.
Co-payment – A predetermined (flat) fee that an individual pays for health care services, in addition to what the insurance covers.
Deductible – The amount the individual must pay for health care expenses before insurance coverage pays expenses.
Out-of-pocket Maximum – A predetermined limited amount of money that an individual must pay out of their own savings before an insurance company will pay 100 percent for an individual’s health care expenses.
Pre-existing Conditions – A medical condition that is excluded from coverage by an insurance company because the condition was believed to exist prior to the individual obtaining a policy from the particular insurance company.
Preferred Provider Organizations (PPOs) – A health organization composed of physicians, hospitals and/or other providers which provide healthcare services at a reduced fee.
Usual, Customary and Reasonable – An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor, or required for treatment.
The Advantages of Individual Health Policies
Many people think individual policies are a poor alternative to employer coverage but they actually offer several advantages.
Coverage is tailored for you. When you are covered through your employer, you get put into a “one-size-fits-all” policy. You end up paying for benefits you don’t need, and may not get coverage for benefits you do need.
You are responsible only for your own health. When you are covered by a large policy at work, your premiums are priced to cover the health of everyone on the policy. Your employer might pay the entire premium, but that money has to come from somewhere. That usually means lower wages and other reduced benefits. Your individual plan means you only need to worry about the costs of your own healthcare.
What Is HIPAA?
HIPAA stands for the Health Insurance Portability and Accountability Act of 1996. It seeks to address and standardize a broad range of activities by health insurance companies and health care providers. HIPAA includes five specific provisions, or titles.
Title I – Health care access, portability, and renewability
Title II – Preventing health care fraud and abuse, administrative simplification, and medical liability reform
Title III – Tax-related health provisions
Title IV – Application and enforcement of group health plan requirements
Title V – Revenue offset provisions
The intent of the federal HIPAA laws and corresponding Wisconsin legislation is to decrease the cost of health care and protect the privacy of personal health information.
What HIPAA Does Not Provide
• HIPAA does not address the issue of the cost of insurance coverage.
• HIPAA does not require that your employer offer health insurance to its employees.
• HIPAA does not require that your employer offer comparable coverage to the coverage you had in the past.
• HIPAA does not require that an insurance plan cover all your medical costs or cover all your medical conditions.
• HIPAA does not require that health insurance companies accept your application for an individual insurance policy when you do not meet their underwriting standards.
Who Is Affected?
HIPAA applies to health plans and health care providers. Health plans include plans offered by insurance companies, health maintenance organizations (HMOs), and limited service health organizations.
How Do the Privacy of Health Information Provisions Affect Me?
Both federal and state laws offer some protection of your personal medical information. The federal privacy laws apply to both health care providers and insurance companies. More information on the federal privacy laws can be obtained by visiting the United States Department of Health and Human Services Web site at www.hhs.gov/ocr/hipaa. Wisconsin insurance law includes requirements that insurance companies must meet when obtaining and using your personal medical information. Insurance companies may require your personal medical information in two situations.
First, it is often necessary for an insurance company to review your medical records to determine the risk (how much it will cost to pay potential claims) associated with offering insurance coverage to you. Second, it is often necessary for an insurance company to review your medical records to determine whether the claims you submit for payment are eligible for coverage under the terms of the policy. An insurance company cannot obtain your personal medical information without your written consent. An insurance company can either request written consent at the time of your application for coverage or as it finds necessary for the processing of a claim for benefits under your policy. If an insurance company obtains a signed disclosure authorization as part of the application for coverage, it must indicate in the disclosure authorization the purposes for which the disclosed personal medical information will be used. A disclosure authorization authorizing the company to obtain personal medical information for the purpose of making coverage decisions cannot be valid for longer than 30 months from the date on which it is signed. However, an authorization authorizing the company to obtain personal medical information in connection with a claim for benefits is valid for as long as your policy is in force and until all claims pending under the policy are processed.
If an insurance company requests written consent to obtain your personal medical information only as it finds necessary for the processing of a particular claim or claims, it must obtain a signed disclosure authorization each time it requires an individual’s personal medical information.
What Are My Rights?
• You have the right to refuse an insurance company access to your personal medical information. However, doing so may result in the insurance company having insufficient information to determine eligibility for coverage, premium rates, or policy benefits.
• You have the right to request all personal medical information regarding you and your minor dependents in an insurance company’s possession.
• You have the right to request the correction, amendment, or deletion of any personal medical information regarding you or your minor dependents in an insurance company’s possession.
Cost: National Health Care Spending
- In 2008, health care spending in the United States reached $2.4 trillion and was projected to reach $3.1 trillion in 2012.
- In 2008, the United States will spend 17 percent of its gross domestic product (GDP) on health care. It is projected that the percentage will reach 20 percent by 2017.
Cost: The Impact of Rising Health Care Costs
- A 2005 study by Harvard University researchers found that the average out-of-pocket medical debt for those who filed for bankruptcy was $12,000. The study noted that 68 percent of those who filed for bankruptcy had health insurance. In addition, the study found that 50 percent of all bankruptcy filings were partly the result of medical expenses.
- About 1.5 million families lose their homes to foreclosure every year due to unaffordable medical costs.
Coverage: Who are the Uninsured?
- Nearly 46 million Americans, or 18 percent of the population under the age of 65, were without health insurance in 2007.
- The number of uninsured rose 2.2 million between 2005 and 2006 and has increased by almost 8 million people since 2000.
- The number of uninsured children in 2007 was 8.1 million – or 10.7 percent of all children in the United States.
- Young adults (18 -24 years old) remained the least likely of any age group to have health insurance in 2007; 28.1 percent of this group did not have health insurance.
Coverage: Why is the Number of Uninsured People Increasing?
- Rapidly rising health insurance premiums are the main reason cited by all small firms for not offering coverage.
- Losing a job or quitting voluntarily can mean losing affordable coverage – not only for the worker but also for the entire family. Only seven (7) percent of the unemployed can afford to pay for COBRA health insurance.
How Does Being Uninsured Harm Individuals and Families?
- Lack of insurance compromises the health of the uninsured because they receive less preventive care, are diagnosed at more advanced disease stages, and once diagnosed, tend to receive less therapeutic care and have higher mortality rates than insured individuals.
Ø Regardless of age, race, ethnicity, income or health status, uninsured children were much less likely to have received well-child checkups. One study showed that nearly 50 percent of uninsured children did not receive a checkup in 2003, almost twice the rate (26 percent) for insured children.
- About 20 percent of the uninsured (versus three percent of those with coverage) say their usual source of care is the emergency room.
What Additional Costs are Created by the Uninsured Population?
- The United States spends nearly $100 billion per year to provide uninsured residents with health services, often for preventable diseases or diseases that physicians could treat more efficiently with earlier diagnosis.
- Hospitals provide $34 billion worth of uncompensated care per year.
- The uninsured are 30 to 50 percent more likely to be hospitalized for an avoidable condition, with the average cost of avoidable hospital stays estimated to be about $3,300.
III. Tips To Consider When Buying Health Insurance
v Affordability – What can you afford to spend on health insurance? Be realistic- – you don’t want to lose your insurance because you cannot afford to make the monthly premium.
v See what’s available – You may have the option to purchase health insurance through your employer. Your employer may off-set some of the costs of these plans, and therefore this may be a more affordable option, but be sure to see what the limitations of these plans are. Less expensive is not always the best way to determine if the plan is the right one.
v Shop around – Get quotes from multiple insurance companies in order to make the best decision. By comparing various companies you may save some money and also find some greater benefits. Be sure you are comparing the same type of plans.
v Kinds of coverage – What are your needs? Are you planning on starting a family, therefore needing maternity and child coverage? Would you like your doctor office and hospital visits included in your coverage? Do you need coverage for prescriptions? Be sure to consider your current and future needs when shopping for insurance.
v Doctors and hospitals – Another factor to consider is which doctors and hospitals are part of the approved providers in that particular network. Is your doctor included? Where is the nearest included hospital?
v Pre-existing conditions – What are the limitations on pre-existing conditions? Be familiar with the limitations of each plan. There are many insurance plans that place restrictions on accepting clients with pre-existing conditions, including waiting periods, before coverage for the specified condition(s) begin.
v Take your time – Don’t feel pressured to make an instant decision just because you need coverage. An insurance company is allowed 60 days to process your application and approve or request additional information. Be sure to give yourself plenty of time to purchase health insurance, especially if you have any pre-existing conditions.
v Read before signing – Be sure to carefully read the contract of the plan and do not be afraid or ashamed to have someone explain it to you. This is an important decision and you need to know that it will provide the benefits to cover your needs.
v Never pay cash – Always use a check, money order or credit card when buying a policy so you have a record of your purchase. Never make any payments payable to the agent – always payable to the insurance company.
v Obtain copies of your medical records – You can also request a copy of your medical records under the Health Insurance Portability and Accountability Act (HIPAA).
v Check to see if you have a file with the Medical Information Bureau (MIB). The MIB is a central database of medical information shared by major insurance companies. If the MIB has a file on you, a free copy can be obtained once a year.
IV. Plan Types
Short-term medical insurance is designed for healthy individuals and families who do not need coverage for pre-existing conditions. Short-term medical policies are temporary solutions that can provide a low-costs safety net in case of illness or injury that might develop during the coverage period.
Most short-term policies limit the amount of time that the insured can keep the policy to 12 months or less. Short-term health insurance is typically bought in one-month increments that make it convenient to drop at the end of the month. Short-term medical policies are rewritable, not renewable.
Travel Insurance is a travel protection plan that includes trip cancellation, trip interruption, baggage protection, medical evacuation and other critical insurance coverages.
Traditional Health/Major Medical
These plans range in benefits. You can select a plan with few benefits or a more comprehensive plan based on your needs. A basic plan may offer only a few doctor office visit copays per year and lower benefit maximums at a lower monthly cost versus a more comprehensive plan offering more doctor office visits per year and higher benefit maximums along with additional benefits such as preventive care, etc. The more benefits a plan has, the higher the monthly premium tends to be. Benefits commonly seen in these types of plans are: doctor office visit copays, prescription drug coverage, preventive care, vision, dental, supplemental accident. These plans usually work with an HMO or a PPO network.
These plans require or create incentives for an enrollee to use providers that are owned, managed, or under contract with the insurer offering the health benefit plan. Examples of managed care plans are health savings account (HSA), health reimbursement account (HRA), and self-funded plans.
General Information Needed to Obtain a Quote
- Zip Code
- Date of Birth
- Tobacco Use
- Pre-existing Health Conditions
*Required for all members who would be covered by policy.
Here are some questions to help you determine which type of plan will best fit your needs.
Q: Are you seeking insurance to cover you primarily in the case of a serious accident, injury or illness?
Q: What insurance benefits do you anticipate using?
- How many times a year do you visit a family physician or specialist?
- Will you use more comprehensive benefits such as prescription drugs or preventive care?
Q: Are you comfortable having a higher deductible in exchange for a lower monthly premium or would you rather pay a higher monthly premium and have a lower deductible?
With this information, your agent/broker will be able to quote and present only the plans that, based on your answers, would best fit your needs.
There are essentially two ways to apply for an insurance policy: 1) fill out the paper application or 2) fill out an on-line application.
Consult with a qualified independent insurance broker. They can help you through the application process. It is always best to complete the application form with your agent/broker. By completing the application form with your broker, you will have an answer to any questions that may arise during the process.
After you and your broker have completed the application, take a moment to review the information you will be submitting. It is recommended that you also get a copy of the application that is being submitted and retain it in your files in the event that there are questions raised later by the insurance company.
The two types of applications are the same but there are some small differences. One of the differences is cost. Most paper applications are accompanied with an application fee. This fee is for the person who, once the company receives the application, inserts all information into a computer and processes the application.
An on-line application generally does not have an application fee. There are some exceptions to this; short term health plans usually assess an application fee and a monthly administration fee.
IF YOU GET A FOLLOW UP CALL…
Answer only the questions asked. Do not volunteer any additional information. Be courteous and remember the interviewer is not your friend or your medical doctor. In these types of interviews you have NO privacy protection. In addition, the interview will most likely be recorded, so think before you respond.
If you don’t know the answer to a question, be honest about it. I recommend you get comfortable with saying, “I do not have that information, please contact my doctor.” When asked specific questions about medical procedures don’t guess, refer them to your doctor(s) and your medical records.
Be honest and stick to the facts regarding your medical history. The company you are applying to may have access to your MIB file, and already know certain aspects of your medical history. If you are caught lying, you can be denied. Most applications ask if you’ve ever been denied health insurance, and a denial can be an immediate “red flag” on any future applications.
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An Intermediary’s Guide to Wisconsin Insurance Law, Eighteenth Edition, 2008, Madison, Wisconsin.
Consumer’s Guide to Managed Care Health Plans in Wisconsin, 2006, Madison, Wisconsin.
Fact Sheet on Continuation and Conversion Rights in Health Insurance Policies, 2002, Office of the Commissioner of Insurance.
Office of the Commissioner of Insurance, www.oci.wi.gov
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