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Health insurance basics
It's a fact of life — you need health insurance — and the time to get it is before you have an accident, suffer a serious illness, or discover you're pregnant. Insurance doesn't cover health care for medical problems or conditions that start before the moment you have your policy. Finding adequate coverage might seem overwhelming, but knowing the basics can help make your search less stressful.
Your boss doesn't have to provide health insurance
The first reality of health insurance is you do not have a right to it. There are no state or federal laws requiring private employers to offer health benefits to their workers.
“For a number of valid reasons employers are not mandated to offer or provide health insurance for their employees,” explains Peter Bigelow, CLU, employee benefits specialist with The Foresight Group. “It is common knowledge; however, that most employers though not mandated to do so offer insurance to their employees for a variety of reasons related to competition and smart business practice.”
If you have benefits through your employer, and you quit or lose your job, don't assume you will be able to pick up the identical coverage for the same price.
Similarly, don't expect your former employer to extend your benefits beyond your last day at work. There is no "grace period" during which you're still covered.
If you do lose your employer-sponsored benefits, there is a federal plan called COBRA (Consolidated Omnibus Reconciliation Act) that could provide you with a short-term safety net.
Another federal law that offers some protection to workers experiencing a short-term lapse in their coverage is HIPAA (Health Insurance Portability and Accountability Act).
Individual health insurance can be costly
If you need to purchase individual health insurance, it can be expensive. Unlike group plans, in which the costs and risks associated with health care are spread among many people; individual health policies are "medically underwritten" to take into account your personal health history. Any "pre-existing" condition such as heart disease, diabetes, and even pregnancy, can nix your chances of acceptance or boost your premiums. Some states require individual health insurers to offer everyone a plan, a mandate known as "guaranteed issue."
Expect to pay more and more
Once you have a health plan, don’t expect your premiums to remain the same. Health insurance companies often seek permission to raise premiums. Additionally, some states allow health insurers to "file and use" rate increases, which means the insurers only have to submit their increases in writing and then they may immediately begin charging customers more money. Unless insurance regulators determine the rates are excessive, the insurers are allowed to keep charging the higher premiums.
North Carolina Insurance Commissioner Jim Long says even if you have group health insurance, there’s a good chance your rates will climb. “Even though you have not presented any claims, others that are insured by the same type policy have presented claims. Rates are directly affected by the claims experience of the group insured under a given plan or policy,” Long explains.
Help when you can't afford an individual plan
If you're a college student and you need coverage — perhaps you're being dropped from your parents' plan — your school might offer reasonable health insurance.
No matter what your age, there are several federally sponsored programs to help you if can't afford the premiums for individual health insurance, providing you meet their eligibility guidelines:
- Medicare, a health insurance program for people age 65 or older, certain younger people with disabilities, and people with end-stage renal disease.
- Medicaid, a program for the poorest individuals and low-income families with children.
- The Children's Health Insurance Program (CHIP), a plan that provides health care to children whose parents make too much to qualify for Medicaid, but earn too little to afford individual health insurance.
Many states offer health care plans for children of parents, who don’t have health insurance through work and cannot afford individual plans. Some states have expanded the plans to cover the parents as well.
New York Governor George Pataki, like many of his fellow governors, is urging low-income parents to sign up for these programs. “This landmark health insurance program for working adults with lower incomes will help ensure that hundreds of thousands of families get the high-quality health care they need to build a happy and healthy future,” Pataki says.
Making sense of alphabet soup
Before you visit a country where the population speaks a foreign language, it helps to know a few key words and phrases. The same holds true when you're trying to decipher the lingo of health insurance. Whether you're buying individual or group health insurance, know there are several health plan varieties, including traditional indemnity fee-for-service plans (FFS), health maintenance organizations (HMOs), point of service plans (POS), and preferred provider organizations (PPO). Each plan has its own features to consider before making your choice.
FFS, also called traditional indemnity
FFS coverage offers flexibility in exchange for higher out-of-pocket expenses, more paperwork, and higher premiums.
FFS advantages
- You may choose your own doctors and hospitals.
- You may visit any specialist without getting permission from a primary care physician.
FFS disadvantages
- There's typically a deductible (anywhere from $500 to $1,500) before the insurance company starts paying claims, and then doctors are reimbursed about 80 percent of the bill while you pick up the remaining 20 percent.
- You might have to pay up front for medical services, and then submit the bill for reimbursement.
- FFS plans pay only for "reasonable and customary" medical expenses. If your doctor charges more than the average for your area, you will have to pay the difference.
HMO
HMOs are the least expensive, but also the least flexible of all the health insurance plans. They are geared more toward members of a group seeking health insurance.
HMO advantages
- They offer their customers low co-payments, minimal paperwork, and coverage for many preventive-care and health-improvement programs.
HMO disadvantages
- You must choose a primary care physician, also known as a PCP.
- HMOs require you to see only network doctors, or they won't pay.
- You must get a referral from your PCP to see a specialist.
POS
POS plans are more flexible than HMOs, but they also require you to select a primary care physician (PCP).
POS advantages
- Depending on your insurance company's rules, you may choose to visit a doctor outside the network and still receive coverage — but the amount covered will be substantially less than if you went to a physician within your network.
- These plans tend to offer more preventive care and well-being services, such as workshops on smoking cessation and discounts to health clubs.
POS disadvantages
- You must choose a PCP.
- While you may choose to see a physician outside the network, if you don't receive permission from your PCP, you're likely to wind up submitting the bills yourself and receiving only a nominal reimbursement — if any.
PPO
PPOs give policyholders a financial incentive — reasonable co-payments (also called co-pays) — to stay within the group's network of practitioners.
PPO advantages
- The standard co-payment is $10 for a routine office visit during regular hours.
- You may go to any specialist without permission, as long as the doctor participates in the network.
PPO disadvantages
- If you see an out-of-network doctor, you might have to pay the entire bill yourself, and then submit it for reimbursement.
- You might have to pay a deductible if you choose to go outside the network, or pay the difference between what network doctors and out-of-network doctors charge.
How to find an individual health plan
Your first step in getting health coverage is to contact an insurance agent in your area, or an insurance company. An agent should be familiar with the insurance companies that do business in your state, especially those able to provide the coverage you need.
You might do business with either a "captive" agent who works for one insurance company, or an independent agent or broker who sells policies for a variety of companies. A list of agents can be found in your phone book or by contacting your state department of insurance.
You should discuss with your agent your own particular health insurance needs. Think carefully about what coverage you must have. Do you need health insurance for your whole family, or just yourself? Do you want to choose your providers? If you're over 65, do you need insurance to fill the gaps in Medicare? Do you need — and can you afford — long-term disability and/or long term care coverage?
When you've found the right coverage, you need to fill out an application or give information to your agent to complete the necessary forms. Be honest. It's important to disclose your medical history thoroughly and accurately. Report all of your health problems to your agent. If any of your health information is misstated or incomplete, the company might refuse to pay your claims and could cancel your policy.