Tuesday, January 08, 2008

Phantom Insurance and Other Ways to Waste Dollars

It seems that consumers everywhere are complaining about the cost of health care and health insurance.

At the same time they are throwing away dollars like there was no tomorrow, buying phantom insurance and other ways to waste their money.

Here are a few examples.

A lady called looking for health insurance. Her current plan was increasing to over $600 per month. Among her health issues was high cholesterol. Every year her doctor ordered a lipid panel test as part of her physical exam. He also had her on an expensive cholesterol reducing med.

I suggested a carrier that would insure her but would not cover her cholesterol med or her lipid panel.

The premium was $280 less than her renewal.

The med would run $140 per month. The lipid panel around $80, once a year.

She opted to keep what she had and pay the higher premium.

She believes she has coverage but all she really has is phantom insurance. The cost of the phantom insurance is over $2500 per year.

A man asked me about options, should he leave his current employer plan and purchase individual insurance. He was entertaining a job offer that would increase his current salary by $80,000 per year but did not offer health insurance.

His current plan was quite rich with $20 copays and a $500 major med deductible. His cost was $100 for him and his wife.

He looked at plans with a $1000 deductible and $25 copays for $700 per month. I suggested a plan with a $5000 deductible and a $300 premium.

He asked what the difference was in the $700 plan and the $300 plan.

With the $700 plan you have something similar to your current coverage. So what do you get for the $400 difference?

You get to forfeit $5000 of your raise. Money you will never see again.

He said he wanted to weigh his options but felt "more comfortable" with the lower deductible plan.

He wanted phantom insurance.

A man called about HSA plans. His wife was a reluctant participant in the decision. She really liked the copays.

We finally resolved all of her issues after several weeks of hashing out issues. But there was one final stumbling block.

"Her doctor" was not in the network of the proposed carrier. Another carrier had an identical plan but the premium was $160 per month more.

She was willing to pay $1800 per year in additional premiums to see her doctor once a year.

She wanted phantom insurance.

In case you haven't figured it out, Phantom insurance isn't insurance at all. It is additional premiums paid for coverage that does not exist and a complete waste of money.

When consumers stop buying phantom insurance they can pocket more of their hard earned money and stop padding the coffers of the carriers.
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