Functional Illiteracy

Most of us speak English. Some also speak a second language such as Spanish, French, or Southern.

Very few speak insurance.

So when it comes to understanding what you have, or knowing what you need, it is as if you are in a foreign land and no one speaks your language.

When it comes to buying insurance most people are functionally illiterate. Let me give you some real life examples.

Jim is a banker looking for health insurance. He is reasonably healthy, especially having survived a bout with cancer from 6 years ago. His wife takes a common anti-depressant and both children are on acne medication.

When we met, Jim had been turned down by Blue Cross and Aetna. He told me he really liked the Aetna plan and it seemed to be a good fit. I asked a few questions, taking detailed notes, and then told him I thought I could get him approved by Aetna if he was willing to work with me.

It took almost a week, but I did get him and all family members approved by Aetna, but with a slight rate up.

When I called to tell him the good news he thanked me for my hard work. He also told me he had applied with Golden Rule after asking me to help and that Golden Rule had approved him "without the hassle they had felt from Aetna" and had given him a good rate.

When I quizzed him about the offer it became quite clear he had purchased a plan that would never cover doctor visits or prescription medications. As a cancer survivor I was quite surprised he would pick such a plan.

He also paid extra for an annual wellness benefit. The premium runs around $800 per year and he is not allowed to use the benefit during the first policy year. The benefit has a value of around $800 but only if all family members have a physical.

Jim is functionally illiterate.

He bought a plan that can potentially cost tens of thousands of dollars each year if anyone in his family have a major claim. He also paid for something he cannot use for 12 months.

Here is another example.

I recently contacted a lady who had requested assistance in finding health insurance. When I called she said she had already decided on "Atena" and was waiting until Monday so she could sign up with them.

I told her she could sign up today if she liked, and the company was Aetna, not Atena.

When I asked about the plan she wanted she indicated it had a $1250 deductible, doctor copays and Rx coverage. She was unable to find the premium on the Aetna website.

I told her the premium was $194 and the plan did not cover doctor visits or Rx. In essence, she had half a plan and none of the benefits she wanted or needed.

She abruptly cut me off and said she would just wait to talk to someone at Atena who could take her order.

She was functionally illiterate.

The plan has the potential to drain her bank account by thousands each month if she has a major claim. For $14 more in monthly premium she can get a plan that will cover ALL her expenses, including doctor visits and Rx. However, her mind was made up. No need to confuse her with the facts.

I see this quite a bit.

One question that comes up with some frequency is "what is my out of pocket limit"?

The answer is, it depends.

Some carriers include the deductible in setting your OOP (out of pocket) limit while others do not. Your OOP does not include copays and separate deductibles such as for Rx or ER.

About 20% of the individual medical plans sold by major carriers do not include coverage for medication. This is no big deal until you need the coverage.

So how will you pay for Avastin ($50,000 per year) or Erbitux ($120,000 per year) if you contract colon cancer? How about Herceptin ($36,000 per year) for breast cancer?

Functional illiteracy will cost you dearly. Unfortunately, most people find out their plan falls short when a claim is denied.