And Then Sometimes This Business is Fun…

Over the years, I’ve had the privilege of becoming the local “international medical expert.” Primarily, this is because I write a handful of these plans each year, whereas most agents don’t get much call for it, or don’t have the inclination to learn about it.

International medical is a burgeoning industry: as we become more and more a global economy, business doesn’t “stop at the shore.” Many executives travel overseas, a lot of seniors like to take those Italian cruises, and there are folks who engage in humanitarian efforts.

Once such gentleman – my client, in this case -- is headed over to Tanzania later this month. He’s part of a medical supply effort undertaken by the Rotary Club. They’re delivering over 400,000 doses of medication, donated by one of those evil, greedy, profit-driven pharmaceutical companies, obviously in direct violation of said company’s pact with Satan. My client and his daughter are accompanying the life-saving medications as distribution auditors.

He is covered by Medicare, which does generally stop “at the shore.” He’s concerned that, if he’s seriously ill or injured, or has need of urgent medical care, that such care will be more readily available if he can pay for it. Which is where the insurance comes in. Most insurance plans sold today don’t cover much, if any, expense incurred outside the US. Of course, some do, so it’s important that folks check with their carrier before checking their luggage.

In this case, the plan covers both injury and illness, and provides for emergency medical evacuation back to the states. It also covers emergency reunion, if the attending physician feels it would be helpful to have a family member present.

The plan itself is pretty simple: it’s built on a traditional major medical plan chassis: there’s a deductible, and some co-insurance, and then coverage at 100% to the stated maximum. That maximum, BTW, is perhaps the most interesting part of the plan: when you purchase such a plan, you are given a choice about what the upper limit for claims will be. In this case, the choices range from $50,000 up to a cool $1 million. Of course, the premiums reflect these amounts.

Of course, no discussion of any kind of medical insurance would be complete without considering pre-existing conditions. In this case, they’re defined as any injury or illness “which was contracted or which manifested itself, or for which treatment or medication was prescribed 3 years prior to the effective date.” Pretty standard stuff, but important to keep in mind.

I can’t wait to see the slides from the trip!

The Third Side…

A long time ago, I had a sales manager who told me “you can’t compensate for other peoples’ ignorance.”

What he meant by that was that, when other folks make stupid decisions, I shouldn’t take it personally.

In the post below, Bob Vineyard tells of two of his clients who either bought coverage or chose not to, and the consequences of those decisions. He characterized the stories as two sides of a coin. In a flippant e-mail, I asked “only two sides?”

Well, turns out there’s a third:

Recently, I wrote a policy for a family. There were some health issues, but we were able to get coverage from one of the two more lenient carriers in this market, at what I considered a reasonable cost. After a month or so, they asked me if there was a better plan available, and I suggested that we apply to the other lenient carrier. Of course, I urged them to continue the existing plan until we had the new one in place. This shouldn’t have been a problem, since we didn’t need to send a check with the new application.

So, of course, they let the existing policy lapse, and then called me to get the new one started. And, of further course, it needed to be in place immediately.

So, we sent in the app to the other carrier, which immediately asked for additional information on the husband. Weeks later, he eventually calls the 800# that I’ve given him, to speak directly with the underwriter’s assistant, in order to provide that “additional information.”

Which information, of course, resulted in his being declined for coverage. They’ll issue a plan on the wife and kids, mind you, but not on him. And since this is PHI (Protected Health Information), I have no clue what caused the underwriter to decline coverage on him, making it even more difficult to obtain coverage elsewhere.

I just called with the “good news, bad news.” He is not a happy camper. And I feel bad for him, because I am human. But I don’t feel too bad for him, because I had – a long time ago – a good manager.

I’ll keep you posted when this is finally resolved.

I hope.

"A Coin Has 2 Sides..."

My friend and colleague Bob Vineyard has a new post up on his blog, one that really touched me.

He tells the (true) stories of two young people who had the opportunity to purchase inexpensive coverage, and who subsequently had significant claims.

One purchased the insurance.

The other didn't.

Sometimes, my clients (and prospects) don't heed my advice. Most of us who take this vocation seriously are loathe to engage in the "hard sell." Bob's clients' experiences really drive home why coverage is important, but in a way that is most definitely NOT a "hard sell."

As they say in the blogosphere, read the whole thing.

There are no coincidences, Part II

Continued from yesterday...

Dr Greenberg does, however, make one somewhat valid point (making him 1 for 5, not exactly Hall of Fame material): if all plans were individually owned, there’d be increased competition, and more efficient benefit usage. For more on this, see the posts on “Catastrophic vs Insular.”

Of course, he then goes on to break his one-point winning streak with this gem: “Individuals might belong to a health care plan for many years or decades.” Why? Oh, because plans would have an incentive to “invest in a person’s health.”

He’s kidding, right?

Carriers are impersonal, corporate entities which are designed to generate a profit for their shareholders. They do this by offering reasonable plans, at reasonable prices, for a reasonable time. Eventually, though, rates begin to climb (regardless of whether employer-based or individually owned), and adverse selection takes over. There’s also attrition due to age, family status, heck, where one lives. I would have expected to see this silliness from Paul Krugman, maybe, but a supposedly serious economist?!

Perhaps the most egregiously stupid idea put forth by Dr Greenberg is his Earned Income Credit Model of health care: in order to levelise the playing field for those with severe or chronic conditions, or advanced age, or maybe being pregnant, Dr G proposes a “risk-adjustment payment based on age, gender, disability, or prior hospitalizations.” In other words, government subsidized health insurance. Didn’t we already reject this idea?

So, his solution is to remove one 3rd party (the employer) and replace it with…wait for it…another 3rd party (the government). But it was the government’s tax policy that created the “problem” in the first place. So we’re back to square one, right?

Not exactly; now we’re actually behind the curve. That is, we’ve substituted one somewhat-inefficient 3rd party payor with a substantially-inefficient one. By putting the government in the position of subsidizing health plans, one guarantees that the cost of those plans will increase substantially (cf: college tuition).

Thanks to Dr Ford for bringing this interesting – if flawed – article to our attention.

There are no coincidences…

So opines my better half. Her point is that everything happens for a reason, although that reason may not be immediately (or ever) apparent.

I bring this up because Bob Vineyard recently posted this comment: “My personal opinion is that employers should provide as many health benefits as possible . . . in lieu of higher wages. The tax breaks to the employer (and employee) are considerable.” The “coincidence" is that Dr Ford over at CA Medicine Man has posted his response to an article on this very subject in Internal Medicine News.

Let me take a moment to mention that Dr Ford’s blog is an extremely readable, informative, and interesting place. As a physician, he brings specific medical knowledge, but it’s never too technical, and never dry.

The article, by Dr. Warren Greenberg, posits that we should do away with the corporate tax-break for health insurance, which would lead to increased competition based on quality of care. Dr G is a Professor of Health Economics at George Washington University in Washington.

He is also ignorant of how heath insurance really works. Those who are familiar with the term may categorize the following as a fisking.

Dr Greenberg’s first premise is that health plans compete primarily on price. Actually, he gets this partially correct: price does, indeed, play a major role. But it is not the overarching criteria; if it were, then the lowest priced plan in a given market would ALWAYS dominate that market. Since that doesn’t happen, it follows that his premise is false.

He follows that up with the assertion that “there is relatively little competition among health plans based on quality of care.” For a Professor of Economics, that’s pretty sloppy. Where are the facts and figures to back that up? Where are the studies that either support or refute this claim? He continues, “if a particular health plan were known for its high-quality care, it would likely attract the sickest — and most costly — patients.” Again, this ignores the real-world fact that plans DO compete in quality: who knowingly buys the plan with the WORST care? And trust me on this: if a plan offered consistently poor quality care, the market would know this, and competitors would capitalize on it.

Since he hasn’t identified the real problem, he goes on to offer his solution: remove the tax-break for corporations. Yes, you read that correctly: the way to foster better care is to make insurance more expensive. If you agree with this conclusion, then you won’t like the rest of this post.

Dr G avers that if employer based health insurance was stripped of its tax advantages, it would become more popular. Really?! Again with the baseless assertions. On what facts is this conclusion based? Certainly not on any real world experience. The tax advantages of employer based coverage are, if anything, a minor issue. What makes group insurance attractive is the underwriting (guaranteed issue) and the benefit configuration (multiple options, maternity, etc).

The climax of the article, such as it is, is the assertion that absent employer-based coverage, plans would “be much more conducive to competition based on quality.” And why is this? Well, it’s because of “(h)igh workforce turnover.”

Hunh?!

What does plan competition have to do with workplace turnover? The answer is, not much. Yes, it’s true that because the plan is sponsored by a third party (the employer), the employee has little vested interest. But this fails to take into account the myriad of financial products now bundled with the medical ones (FSA, HRA, HSA, etc), and the now ubiquitous use of deductibles, co-pays and co-insurance. Surely the employee has ownership issues now.

More tomorrow…

Forcing Employers on Medical Insurance...

Some thirty states are considering bills that would require employers to pay for at least part of the health coverage for the uninsured. There is, of course, more here than meets the eye.

First, there is a tendency in the media (and among those in the professions) to conflate “health care” and “health insurance.” This is demonstrably inaccurate: those without health insurance rarely go without health care, unless they deliberately choose to forego it.

Second, we constantly hear about “tax breaks for business,” and “employer paid health insurance.”

Neither of these things actually exist:

Businesses do not pay taxes, they collect them. And businesses do not pay for health insurance, they simply re-route dollars from employees’ wages to health insurance carriers.

The regulations under discussion here tend to fall into three broad categories:

1) Mandating employers to provide health care to workers or pay into a state fund to help the uninsured

2) Requiring that employers doing business with the state provide health insurance

3) Requiring enrollees in state public assistance programs to list their employers, thus embarrassing companies into paying better benefits.

Let’s take these one at a time: First, mandating employers to provide health care -- in essence, forcing more dollars away from employees and into insurance company coffers – is a surefire way to increase unemployment. And this does nothing to help provide health coverage to those who are self-employed, or work part-time jobs.

Second, how many companies actually do business directly with the government? A percentage, to be sure, but a minority nonetheless. How will this help to decrease the ranks of the uninsured?

The last one is just funny: how does one “embarrass” a corporate entity? Perhaps ABC Widgets can borrow Data’s “emotion chip,” and learn to blush.

But I doubt it.

The basic point here is this: companies do not pay for insurance; they redirect wages. Legislation which does not reflect this reality is doomed to failure.

Chag Sameach! (Happy Holiday!)

Tonight marks the beginning of the Jewish festival of Passover. We celebrate the time, thousands of years ago, when we were freed from slavery.

For the next 8 days, we'll eat nothing made with yeast (in fact, there's a whole raft of foods which we'll miss). Our major staple is a cracker-like product called Matzah, made simply of flour and water. There is a whole litany of terrific Passover humor, as well.

Here's one of my favorites:

A Jewish man took his Passover lunch to eat outside in the park. He sat down on a bench and began eating. A little while later a blind man came by and sat down next to him. Feeling neighborly, the Jewish man passed a sheet of matzoh to the blind man. The blind man ran his fingers over the matzoh for a few minutes, looked puzzled, and finally exclaimed, 'Who wrote this nonsense?'

Have a great Passover!

Many Happy Returns...

It’s been said that the life insurance industry moves at the speed of, well, snails. And there’s some truth to this. But every once in a while a new product, or a substantive enhancement to an existing product, comes along. Such is the case with Return of Premium term life insurance.

A relatively recent development in the life insurance universe, RoP seeks to address one of the major disadvantages of term insurance: what happens at the end of the “term?”

To understand why this is important, let’s examine what term insurance does, and what it doesn’t do. Term life insurance is “pure protection;” that is, it pays a death benefit if/when you die during a specific time frame, or “term.” It’s analogous to renting or leasing your insurance. I’m not going to get into the whole term vs permanent debate here, let’s just leave it that term insurance can provide reasonably-priced coverage for a set amount of time.

One further note: term insurance premiums are generally “locked in” for that period, usually 10, 20 or even 30 years. So the insurer can’t raise your rates if your health declines. But eventually, the end of the term comes along, and one presumably hopes to still be drawing breath. And that’s where things get dicey.

Which brings us back to the question posed above: what happens at the end of the “term?” Well, the rate is no longer guaranteed at that lower level. And many folks decide they no longer need the coverage (again, I’ll defer discussion of whether or not this is wise). And the insured has naught but a bunch of cancelled checks to show for their efforts.

But what if your insurance guaranteed to return every penny you’ve paid in if you’re “still standing” at the end of the term? No matter what your health, no matter what the economy has been doing for lo those many years, you get back everything you paid. This is the premise, and the promise, of RoP. Think of it this way: what if, when you sold your house, you got back all the homeowners insurance premiums you’d paid in? That would be a deal worth considering.

Now, this “extra” doesn’t come cheap. The rate depends, of course on the face amount, but also on the length of the term. Believe it or not, though, the longer that term (30 years vs 10), the lower the extra cost of the rider. This begins to make sense when one considers that the carrier has the use of the money for a longer period of time.

RoP isn’t for everyone, or appropriate for every case. But if you’re looking at term coverage, and you think that you might just outlive it, take a look at RoP.

HIPAA and Maternity: A Dialectic (or a Debacle)…

My good friend, insurance guru Bob Vineyard and I have been engaged in a lengthy, interesting, and frustrating email correspondence.

It all started innocently enough: Bob wrote to tell me that he got his hand slapped (which is in itself not really all that surprising) because – apparently – HIPAA doesn’t consider pregnancy a pre-existing condition.

Usually.

And that’s where it gets interesting.

According to the DOL (Department of Labor):

“If you find a new job that offers health coverage, or if you are eligible for coverage under a family member's employment-based plan, HIPAA includes protections for coverage under group health plans that:Limit exclusions for preexisting conditionsMoreover, under HIPAA, preexisting condition exclusions cannot be applied to pregnancy, regardless of whether the woman had previous health coverage."

This seems counter-intuitive, given that other provisions in HIPAA limit coverage for pre-existing conditions. So, I identified 4 scenario’s where this might apply, to see where this new information would lead us:

1) Jane was covered under a group plan at Employer A, got a new job at Company B, and immediately enrolled in their group health plan.

In this case, there’s no problem; everyone agrees that HIPAA provides for continuity of coverage, and so Jane’s pregnancy would be covered.

Sort of: if there’s a waiting period for new hires, she’s got a problem. But that’s another post.

2) Jane was covered under an individual plan, and then went to work at XYZ Widgets.

Again, as in #1, there should be no problem, because HIPAA recognizes individual coverage as creditable toward group. In other words, the pregnancy should be covered (subject, of course, to the same waiting period proviso as in #1)

3) Jane had no insurance, and went to work at XYZ Widgets. Apparently, HIPAA says that the pregnancy must be covered.

Does it? According to an article on Parenting.com, “if (Jane) had no insurance, got pregnant, then landed a new job with insurance, (her) new health plan would not have to immediately cover (her) pregnancy.” Now, I’m not crazy about relying on the net for such critical information, but it does seem to make some sense. OTOH, I’ll keep digging, and update/correct this answer as I learn more.

4) Jane works at XYZ Widgets, but has no insurance because she waived (declined) coverage when she was originally eligible. Now, she is considered a “late enrollee,” subject to an 18 month waiting period for pre-existing conditions.

Not so fast there, pardner. According to another site, The Employers Council, “(n)o preexisting condition limitations may be imposed on pregnant women…” But, also according to that site, Jane would have had to have had [ed - that sounds clumsy] other coverage in place when she originally waived. Otherwise, she is indeed a late enrollee.

If this sounds convoluted and confusing, it is. I’m still not sure how scenarios 3 and 4 will ultimately “shake out,” so I’m going to consider this post: Under Construction.

Health Insurance: catastrophic versus insular? (Part 2)

Dr John’s conclusion is that “(t)o bring down utilization (and therefore costs) from both the patient and the doctor side, one can require more direct patient out-of-pocket contributions.”

While I don’t disagree, I think that this ignores other factors which contribute to the overall cost of coverage. For example, in any given policy (group or individual), up to 17% of the price is due to government mandated benefits. Such benefits are an integral part of the plan, and cannot be reduced or eliminated. This means that, even if you don’t want or need that benefit, you can’t request its removal in order to reduce premiums.

As to Econblog’s dismay that folks choose plans which are contrary to their best interest: folks still eat Big Macs, smoke, watch way too much TV, and don’t exercise enough, either. All of these are antithetical to one’s good health, yet many (most?) of us are guilty of at least one or two of these “sins.” So it should come as no surprise that health insurance consumers would choose a plan which ill serves them. Then, too, many agents choose the “easy route;” that is, pushing the generic plans because that’s what everyone wants (or so they believe). This is true, BTW, regardless of whether we’re talking group or individual.

By way of example: I’m currently working on a small group case which has experienced major rate increases (I know, shocking; kinda like seeing the sun rise in the east). The plan has a $250 deductible, and then pays 90%, with a maximum OOP (out-of-pocket) of $1,500 (including the deductible). Also, office visits require a measly $15 co-pay. And, of course, there’s the ubiquitous rx card.

As Dr John observes, this type of plan just begs for over-utilization.

My ideal solution would be to move them to an HSA plan with a MUCH higher deductible, and without the office visit co-pays and rx card benefit. This would save the group (and the employees) a lot of premium dollars, which could fund the savings account itself, with plenty of cash left over.

But that’s not my call, it’s the employer’s. No matter what I say, the decision ultimately comes from the man (or woman) writing the check. And if that person doesn’t perceive it in his best interest, or if he fears a negative reaction from his employees, then that plan is never going to be installed.

Remember, too, that the employees have a financial stake in this, and the cost savings would ultimately redound to their benefit. And yes, it’s my job to enlighten said employees that this is the case. But if I can’t convince the employer to make such a change -- and in this case, the employer “gets it;” he understands how HSA works – then the best to be hoped for is that we can increase the deductible a bit, and maybe the office co-pays.

Such is the real world.

Health Insurance: catastrophic versus insular? (Part 1)

Over at California Medicine Man, Dr John is hosting a debate (of sorts) regarding Consumer Driven Health Care (CDHC). His post (linked in the title above) quotes from an Econlog item written by two economists.

Confused yet?

It gets better…

Briefly, Econlog posits that “most consumers would prefer…’insular’ coverage in favor of so-called ‘catastrophic’ insurance.” “Insular coverage” being defined as what most folks own today: office visit and rx co-pays, low deductibles and some modest co-insurance. In other words, generic coverage. “Catastrophic coverage” would be some form of High Deductible Health Plan (HDHP), presumably one that would be HSA-compliant. Econlog’s puzzlement with this mimics my own take on the generic vs HDHP debate, namely: most people, in most years, spend far more in premiums than they receive in benefits, which seems bass-ackwards. As economists, Econlog expresses dismay at this seemingly irrational choice. As a physician, Dr John believes this is because the patient/insured has no ownership in the claim (after all, it’s being taken care of – for the most part – by a third party), so there is a disconnect between the fact of a given claim and the patient/insured’s responsibility for it: “The issue isn't so much ownership in their ailments, it's the perception that someone else is paying the bill (employer or government).” His conclusion is that “(t)o bring down utilization (and therefore costs) from both the patient and the doctor side, one can require more direct patient out-of-pocket contributions.”

As an agent, I think they both fall somewhat short. As I noted in Dr John’s comments section: “Assume that your employer pays for your groceries. Are you going to eat steak or chicken every night? Assume further that your employer pays for your gasoline. Are you going to fill up with premium or the cheap stuff?”

Some answers tomorrow…

When HIPAA Hurts…

Recently, I had occasion to work with a nice lady whose COBRA benefits were about to expire. Unfortunately, she has a number of health conditions that render her uninsurable in the individually-underwritten market.

What to do…

There were three choices, really: transition from COBRA to HIPAA, purchase a limited benefit but guaranteed issue plan, or go naked uninsured. She came to me with about two weeks left before COBRA ran out.

BTW, you may be thinking that a Short Term Medical plan would have bought her some time. Unfortunately, before she came to me, she had applied, and been declined, for an individual medical plan. STM plans, as a rule, are not available to those who have been declined for coverage for health reasons.

In any case, the premiums for a HIPAA plan for her run between $1,000 and $1,300 a month, depending on benefits. The guaranteed issue plan runs about $180. No brainer, right?

Not quite.

True, the guaranteed issue plan would save her $10,000 to $13,000 per year. But, the benefits are quite limited, and a major claim could easily wipe out those savings, and then some. Likewise, foregoing insurance altogether didn’t appeal, either.

This is one of those cases that, although we were able to help, still felt vaguely dissatisfying. I would have preferred to find a solution which encompassed a high deductible (to generate cost savings) PLUS a cap on out-of-pocket (to provide a safety net). Because of her health, this wasn’t an option.

Oh, almost forgot: ultimately, she chose to go with one of the HIPAA plans; in this case, the “less expensive” one. Was that the right choice?

You tell me…

He's Baaaack!

Just to let y'all know that we made it back safe and sound.

New Mexico may be the friendliest place we've ever been (outside Ohio, of course).

A special Thank You to Bob Vineyard (HealthInsurance411) for keeping the homefires burning here at InsureBlog.

The (Often) Overlooked Tax Deduction

Health Savings Accounts are helping individuals save thousands of dollars on their income taxes. These tax-favored accounts, which have only been available since January of 2004, can be opened by anyone with a qualifying HDHP (high-deductible health insurance plan). Once you open an account, you can place tax-deductible contributions into it, which can then be used later to pay medical expenses. Any money not used grows tax-deferred, like an IRA.

HSAs offer many tax advantages over traditional health insurance arrangements.

1) Reduce your federal income taxes. Regardless of your income level or how your income was earned, any money you deposit into your Health Savings Account is considered an “above-the-line” deduction, giving you a 100% write-off against adjusted gross income.

2) In addition the deducting the loss fund contribution, premiums paid for the HDHP are also deductible.

3) Reduce your state income taxes.

4) Tax-deferred growth. Like funds in an IRA, the money in your account grows free from federal taxes.

5) Pay for dental expenses with pre-tax dollars.

6) Pay for vision care with pre-tax dollars.

7) Pay for alternative care with pre-tax dollars, including chiropractic, acupuncture, homeopathy, herbal medicine, or any number of other so-called alternative treatments.

8) Pay for aspirin, bandages, cold medicine, and other household medical expenses with pre-tax dollars. A list of eligible expenses is through Internal Revenue Service publication 502.

9) Pay Medicare expenses with pre-tax dollars, including Medicare premiums, deductibles, copays, and coinsurance.

10) Pay for long-term care insurance with pre-tax dollars.

A Health Savings Account (HSA) enables anyone with a qualifying high-deductible health insurance plan to shelter up to $2650 ($5,250 for families) from federal income taxes. Individuals age 55 or older have an additional $600 in “catch up” contributions. By reducing your adjustable gross income HSAs can reduce your income taxes in at least 10 ways

Bob Vineyard, CLU
(Decided to go easy on you today. The Professor will return, without Mary Ann I am told, next week. I now return you to your regular programming).

Is This the Wrong Start?

Many consumers are making decisions on health care coverage that are potentially deadly. Rising premiums force many employers to cut back or even eliminate group health insurance coverage. COBRA premiums can create “sticker shock” for those who have always enjoyed the shelter of an employer plan. Medical discount plans, illegal in some states, still prevail and consumers choose these plans as an alternative to INSURED health coverage.

All of these factors, and more, force consumers into the market place in search of affordable health care. In an attempt to make coverage more affordable, some carriers are introducing limited benefit plans with premium savings of 40% or more. Sadly, many agents are pushing these plans in an attempt to gain new clients and compete in a market place where low price is a deciding factor.

But how much will these limited benefit plans really cost you?

Those who purchase these plans will not know the TRUE cost of coverage until they have a major claim . . . by then it is too late.

Limited benefit plans DO have a place in the market. Some use streamlined underwriting to allow them to issue policies to people who would ordinarily be declined, rated or restricted by more traditional health insurance plans. THESE kind of limited benefit plans, especially when used in conjunction with a true major medical plan, can keep you from financial ruin. Even if you cannot qualify for traditional medical coverage, some limited benefit plans can help you pay the bills that come due while you are recuperating from a medical crisis.

I am not addressing the almost “guaranteed issue” limited benefit plans, but newer plans that have arrived on the market in the last 6 months or so. The pitch is lower premiums saving you 40% or more. Most people fear a hospital stay for more reasons than just the dread of having something life threatening. They hear stories of hospital stays running $5,000 per day and more.

These newer policies promise to save premiums by providing good inpatient coverage while limiting outpatient benefits. They say you can get off on the right start with their plan by getting the coverage you need but at a lower price. One such plan has a $2500 outpatient limit as their “standard” offering. The “big” print pitch tells you a family of 4 in Atlanta can save around $200 per month over a popular “Blue” plan with a similar deductible.

Saving $200 per month is quite attractive and it makes the sale of these policies easy for the uninformed agent and buyer. Who doesn’t want to save $200 on health insurance?

What most people don’t know is that overall, hospital inpatient claims are approximately half of all claims paid by insurance companies. On a $50,000 claim maybe $25,000 is from inpatient care and the other $25,000 is incurred out of hospital in follow up care.

So how much did you really save in buying a plan with a limited outpatient benefit?

A traditional major medical plan with a $2000 deductible and coinsurance will result in an out of pocket expense of around $4000 on a $50,000 claim.

That same claim when paid under a limited benefit plan results in an out of pocket expense to the insured of more than $26,000!

If you use your $200 per month premium savings and apply it toward a $26,000 loan at 8%, you will have the loan paid off in 25 years and will have paid back over $60,000.

Is it really worth the $200 per month savings? Or did you get off on the wrong start with your health insurance plan?

Bob Vineyard, CLU
(The Prof will return in a few days. In the meanwhile he has kindly allowed me to vent. He WILL regret it . . .)

Whose Ox is Being Gored?

Your perspective on the availability and pricing of health insurance depends mostly on whose ox is being gored. If you are in good health, you pretty much have your pick of plans, carriers and pricing. If you are not your choices become much more limited.

I can empathize with those who are having difficulty finding health insurance due to existing health conditions. But I do find it interesting that some are almost militant in their demand for ready access to health insurance without restriction.

Let’s say you are using anti-depressants, are on a low, maintenance dosage, and have had good success in your treatment. You have not been hospitalized, taken time off from work, have not attempted suicide or other bodily harm. In general, you function within “normal” limits but the meds help to stabilize your moods.

No problem, right?

Not necessarily.

If you are looking for individual coverage the best you can hope for among PPO plans is standard issue but no coverage for meds or provider sessions associated with depression for the first 12 months your policy is in force. Or you may find a carrier that will exclude coverage for depression for 3 years . . . or for as long as you have the policy.

Not fair you say?

You should be entitled to the same health care benefits as others, right?

OK, how about a diabetic? That’s a common affliction, particularly type II diabetes and most people have few problems.

But some people DO have problems. A friend has lived with diabetes (type I) for almost 40 years. Although he is not old (at least not by my standards) he has been on disability for more than 2 years. Over the last 10 years or so he has had numerous surgeries on his eyes, feet, shoulders and probably a few other parts. He is covered as a dependent under his wife’s health insurance. My guess is the carrier has paid out over $200,000 for surgery, therapy, medication, etc.

Is it any wonder why a carrier would not want to insure a diabetic . . . especially on an individual health plan?

Let’s shift gears just a minute. Forget about health insurance. Let’s talk about borrowing money. After all, health insurance is really just a blank check for a loan you never have to repay.

Let’s say you pay your bills on time, are not overextended on credit and are generally a good credit risk. You probably expect (and get) the best rates available on loans.

The people who have a poor credit history, never pay on time, maybe even have a bankruptcy should get the same rate on loans that you get, right?

Of course it doesn’t work that way. Folks with good credit get the 0% financing on cars and 5% or so on home loans. Folks with bad credit get their cars at the buy-here-pay-here place and if they can even qualify for a home loan end up paying 12% or even higher.

Same principle applies to health insurance.

Good risks get the good rates, poor risks pay a higher rate. Those are the rules.

If YOUR ox is the one being gored, and you are having difficulty finding the coverage you want, it may be because you are not looking in the right place. Or more appropriately, you are not talking to the right agent. Very few people are truly uninsurable.

Bob Vineyard, CLU
(The Professor is still in the desert southwest looking for El Dorado . . . the lost mine, not the Cadillac. He should return in a few days and will have fun fixing the mess I have made of his site. For now, enjoy!)

Throw Out the Highs and the Lows

Throw out the highs and the lows, then work with the ones in the middle. This was advice given to me a long time ago by a lady I admired. She was a consultant with one of the alphabet houses in Nashville and handled some big regional, and national accounts. One day I was calling on her as she was sorting through various bids for coverage on one of her accounts.

Despite what most casual insurance buyers think, this is a tedious process. Most insured “shop” their coverage maybe every 2 – 3 years while a few will more often than that. To the untrained eye all plans with the same deductible and “roughly” the same coverage should offer the same coverage.

They don’t.

To the casual buyer, once policies with the same deductible and copay are grouped together, you look for the lowest price.

This is a fatal flaw and one of the reasons I encounter so many people who are dissatisfied with their health insurance plan.

In truth, there are often subtle differences from plan to plan. On the surface they may LOOK the same but once you look at the policy you will see glaring differences.

One plan may include lab work in an office visit copay while another may not. This difference alone can mean the difference in paying $30 - $40 to see a doctor and paying $200 or more.

Looking further, one plan you are considering may pay 20 – 30% of charges for emergency transport (ambulance) while another pays all charges after a $150 copay. OK, you may not use an ambulance that often, but my guess is the last thing you want after a medical emergency is to be stuck with a $500 (or even larger bill).

Did you know that emergency transport companies are hidden providers? They do not participate in any network and are free to charge whatever they want. Ground transport, even for short distances, is usually $500 - $1000 and your plan may only pay $200 or so. If you have to go by med-evac (helicopter) the bill starts at $7000 and goes up from there.

I actually heard a guy complain once about his coverage for an airlift trip to the ER. Seems he was injured in an auto accident and was transported by air to the nearest trauma center. The trip lasted less than 10 minutes and the bill was over $6000. (He must have gotten a break). His plan paid about $800, leaving him over $5000 out of pocket. He felt he was not liable for the charges since he was not conscious at the time and was unable to authorize the use of the hospital.

My guess is he has been unconscious most of his life and this was just one more venture into the Twilight Zone . . .

Back to the point of this post. Do you know how much your carrier pays for ambulance transport?

When you “shop” your coverage do you just look at the items you use the most or do you search for those once-in-a-while things that can really cost you money? Do you look for the lowest price or throw out the highs and lows and work with the ones in the middle?

Will you survive a health crisis only to be faced with a financial crisis over how to cover $5,000 or more in unpaid medical bills?

There is a reason why some plans are less expensive than others. More often than not it is because of what they DON’T pay that makes the difference.

Years ago there was a popular ad for oil filters that ran on TV for what seemed like forever. As I recall there was a mechanic standing in front of an engine he was overhauling . . . a job that runs several thousand dollars. (This was back in the day when folks repaired their cars vs. trading them in on a new model). He talked about how a cheap oil filter can ruin an engine, but implied if you used a particular brand of filter you could avoid engine problems. The closing line to the ad was, “you can pay me now or you can pay me later”.

In other words, you get what you pay for.

You can buy the cheap plan and save a few bucks now, but will it cost you more in the future?

Bob Vineyard, CLU (Filling in for the multi-talented Prof who is currently on assignment in the Southwest.)

TGIF...

In the old Bugs Bunny cartoons, the wascally wabbit could often be heard to exclaim:

"I knew I should have taken that left turn at Albequerque"

Well, that’s where my family’s headed next week. We’ve never been out that way before, and decided that Spring Break would be a fine time to head out west.

While I’m gone (or, as my new friend Kat would say, “on hiatus”), my good friend, health insurance guru Bob Vineyard, will be filling in. Please don’t be too hard on him.

Have a great weekend!

Final (for now) Thoughts on STM...

Each time a new plan is written, both a new deductible and new pre-ex exclusion begins. Let’s take an example:

Jane bought a 6 month STM plan, which became effective on January 1st, and which had a $1,000 deductible. In March, she injured her knee. She sought and received treatment, and submitted the claim. The total amount of the claim, $875, was applied to her deductible. So far, so good.

Then, in May, she developed a kidney stone. Again, she sought and received treatment, this time to the tune of $3,500. Of course, the first $125 went to satisfy the deductible. That left a balance of $3,375, which was covered at 80%: the policy paid $2,700, and she paid the rest. Again, no problem.

In June, her policy expired, but she still needed coverage. By that time, both her knee and her kidneys seemed fine. She bought another 6 month STM, and hoped that she’d soon find a job with group benefits. But here’s the thing: she may have believed that she was simply renewing the (previous) STM plan but she was, in fact, buying a new plan.

In September, she reinjured her knee, again to the tune of $875. Pop Quiz:

The plan paid:

a) At 80%, since she’d already satisfied the deductible back in May

b) The $875 went toward her new deductible

c) Nothing

If you guessed "c)" you win; since she’d already been treated for the knee injury under the first plan, it was considered a pre-existing condition, and so it was excluded.

That’s why I really urge clients to avoid using STM plans for extended periods of time. A better way would be to buy a 3 month STM, and shop for an individual major medical plan to start when the STM expires.

Oh, one more thing: if you’re planning to travel while you’re covered under an STM, read your policy CAREFULLY. Most plans exclude foreign travel, so if you’re out of the country, you’re out of luck. Your agent should be able to help you find a plan that will cover international travel.

A Few More Thoughts on STM

Short Term Medical plans are wonderful tools, if used correctly and judiciously. For example, if you’re between jobs, and need coverage for a short and definable period of time, they’re an inexpensive alternative to COBRA.

Or, you’ve started that new job, but there’s a 90 day waiting period until your new group coverage starts. Well, and STM plan will nicely fill that gap, offering protection until the group plan kicks in.

Maybe you’ve recently graduated from college or tech school, and need temporary coverage during your job search. Again, if you’re pretty confident that this will be a short time, say 3 or 4 months, then STM may be just what the doctor ordered [ed: couldn’t resist the pun, could you?].

But there are some pretty significant downsides to these plans, as well. Recently, I had occasion to exchange emails with a nice lady in a nearby town. Her daughter is taking some time off from school (college), and is unsure about how to go about getting coverage. Her daughter’s too old to be on her folks’ plan, but doesn’t have access to a group plan.

Which seems to mean that a STM plan would be the way to go.

But not so fast!

Since we really don’t know how long she’ll need coverage, we don’t how many months to buy (STM is typically sold in monthly increments). And as I noted above, I am leery of using STM’s for more than a few months at a time.

Why, you ask?

Simple: STM plans do not cover pre-existing conditions, and there is virtually no way to continue benefits once the plan runs out, even in the middle of a claim. Most plans limit “extension of benefits.” That is, once the plan ends, so does your coverage. A typical plan might extend those benefits for a period of time if you’re currently hospitalized. Okay, but what if it’s chemo, or some other condition that requires lengthy outpatient follow-up?

More tomorrow…

The Uninsured: An Interesting (Partial) Solution…

“Beating government to the punch in thinning the ranks of the uninsured, a coalition of 60 large companies plans to offer voluntary health benefits to workers ineligible for employer-based coverage.”

One of our industry journals, in a recent article (click here to read the whole thing), explores how a group of large employers is addressing one of the key demographics of the uninsured: workers who are ineligible for “regular group” coverage because they’re part-time, or seasonal, or even temporary (think Christmas in retail). This group also includes 1099 (contract) workers, as well. It’s estimated that there are some 3 million folks who would fall into this category, representing a pretty decent chunk of the uninsured.
What’s most interesting about this plan is that the product has actually been designed to appeal to folks in this group. Instead of the typical insurance company method of just throwing in benefit after benefit, driving up the cost, and then heavily underwriting the final product, thus effectively rendering it either unaffordable or unattainable by those for whom it was designed, this group actually thought it through.

For example, there would be six different plan configurations available, including a catastrophic, “safety net” design with a high deductible. The first four levels of benefit would be guaranteed issue, which would make it attractive to those who want the least hassle in buying coverage, as well as those with current medical problems. The article doesn’t mention how, or even if, pre-existing conditions would be covered, but one presumes that this has been considered, and resolved.

Another factor is that the plan will (at least initially) be available only through companies with at least 5,000 employees. But, if the idea takes root, I don’t see why this couldn’t be expanded.

And there’s also this: synergy. If (when) this idea takes off, then why couldn’t smaller groups -- Chambers of Commerce, for example -- offer similar plans? Employer purchasing alliances are being talked up; what’s hardly ever mentioned is what product they would offer. This idea seems to answer that question.

Mangled Care

What started out as a good idea to hold down costs quickly became a nightmare for almost everyone. About 15 years ago the health care industry was introduced to a concept called Managed Care. What began as Managed Care quickly deteriorated into Mangled Care.

In the “good old days” life was simple. You had basic coverage that paid $30 per day for room & board and a $400 surgical schedule. Maternity was included in almost every policy, mom was allowed to sleep through the process, she stayed in the hospital 4 days and the entire stay was less than $200.

Not long after that carriers started introducing something new called “major medical”. If your basic benefits expired (after about 120 days of benefit) you could pay a $100 deductible (an enormous sum in those days) and have the rest of your medical bills paid up to the unheard of maximum of $50,000. Since no one had bills that high the $50,000 limit was considered frivolous and many opted for the more reasonable $10,000 limit.

Well “Leave it to Beaver” is no longer on TV, except in reruns. Moms no longer do housework in high heels and pearls, and Dad doesn’t come to the dinner table in a coat and tie. The days of choosing any doctor or hospital and having no more than $100 or so out of pocket no matter how extensive your care don’t exist any more.

Now you have to deal with networks, copays, deductibles, pre-certification, second opinions, continued stay review and discharge planning. You may THINK you are covered in full by your plan only to discover a secret of Mangled Care called hidden providers.

Hidden providers are the care givers that don’t belong to any networks, are free to charge whatever they want for their services, and don’t have to accept what your carrier offers as payment in full. A few examples of hidden providers include:

Emergency transport (ambulance)
Lab & pathology
Anesthesia
Therapists
Radiation & chemotherapy
Private duty nursing

This list is not all inclusive but it does hit the most common ones.

Injured in an accident and have to go to the hospital in an ambulance? Your plan may pay $500 or less for emergency transport. If you travel by ground that may cover a third of the bill. If you travel by air you will be lucky if $500 covers even 10% of the bill.
Need surgery? You probably want anesthesia.

Guess what? The gas passer is out of network. He can charge whatever he or she wants. If you are lucky your carrier will cover 50% of the bill, maybe even a bit more.

And you might need some lab work done, particularly pathology. Yep, that’s another hidden provider.

Your plan document may read in such a way that you THINK your out of pocket on a major claim is limited to $1000 or less, but guess again. Hidden providers can easily boost your out of pocket to $5,000 or more.

Mangled Care just means you can no longer get by with just a major medical plan. You probably need to look at some way to plug the holes unless you plan on taking a second mortgage to pay your hospital bill.

(Authored by Bob Vineyard, CLU - filling in for the talented and beautiful Professor)

Conversions, Continued…

Yesterday, I promised to elucidate [ed-Oooh! A $10 word!] how group conversion plans work. As you may have guessed, there’s not a lot of “there, there” so this will be a brief post.

In Ohio, carriers in the group market must make available a conversion plan for those who lose their jobs and are not eligible to continue their coverage under either COBRA or state continuation rules. The idea is that someone with a serious pre-existing condition may find it difficult or impossible to obtain (adequate) coverage in the individual market.

As you may recall, HIPAA is rather a one-way street; that is, group plans must (generally) recognize coverage from individual plans, but the reverse is not true. Individual plans can limit or exclude coverage for pre-ex, or even decline to insure one who is seriously ill. The conversion rule requires that the carrier offer some plan, one that doesn’t exclude pre-ex. But these plans are notoriously bad deals for those who can qualify for a regular policy. It’s true that the conversion plan can’t exclude a pre-exiting condition, but the benefits in such policies are quite stingy. There is usually a high deductible, no office visit co-pays or drug cards, and other limitations. And they are VERY expensive.

But not all carriers choose to do these conversions in-house. Many out-source this product to other carriers. Recently, I had occasion to do two conversions for folks who didn’t qualify under COBRA or state continuation. Interestingly, the carrier sent me to another insurer, which uses HIPAA plans (perfectly legit). This has the effect of moderating the premiums, offers a choice of two plans (instead of just one), and has a few “bells and whistles” built in (network discounts and an rx card). They’re still pricey (my sister calls this “spendey”), but they don’t seem to be as bad as the traditional conversion plans.

Have a great weekend, and a Happy Easter!

When Good Groups Go Bad…

Okay, the group really didn’t go bad, but I liked the catchy headline. You may recall that I previously posted about a group that had particularly poor “participation” (“An interesting challenge”, posted 2/9/05). Because there were 13 employees, but only 5 elected coverage, it was difficult to find another carrier for the group.

In the event, the employer has decided to do away with the group altogether, and to have each employee apply for individual coverage. We found a carrier that would put all these policies onto one, convenient list bill, and the employer will take care of the appropriate payroll deductions.

Sounds simple, right?

Would that it were so. As you’ve no doubt already guessed, we’ve had a few setbacks. Specifically, two employees (as well as a spouse) have been declined due to health issues. I’m awaiting word on the other three.

Okay, so now what? How will the two employees who have been declined obtain coverage? Since there’s no COBRA issue here, then it falls to state laws. In Ohio, the test for continuing group coverage requires that the insured be eligible for unemployment compensation. Well, fortunately, neither of these two have actually lost their jobs. So what options are left?

Two, actually: First, by state law, group plans that are not subject to COBRA must offer a conversion plan to anyone leaving the group (or, in this case, the group leaving them). Such plans must have no exclusion for pre-existing conditions. Now, this does NOT mean that such conditions MUST be covered.

Hunh?!

Well, let’s take a back problem, for example. Jane has some back problems, and has been successfully treated by her local chiropractor. The group covers this (up to an annual limit), and the doc is in network. Hoorah! But now the group goes away, and we’re offered a conversion plan that has no chiropractic coverage. There’s nothing in the law that says the conversion plan must offer chiro, so Jane will be footing the bill herself henceforth.

I’ll cover the types of conversion plans, and the other option(s), tomorrow.

A COBRA Primer – Addendum…

One last thing: In Part 2, I mentioned that there is no provision for claims to be covered after the last day of the 18th month. Here’s why that’s important:

Several years ago, I had a (life) client who was on COBRA. Now, this was the proverbial guy who had never been sick a day in his life. I had spoken with him several times about coming off COBRA early, and going onto an individual plan. His stock response was “okay, okay, I’ll get to it pretty soon.”

One day, about a week before the end of the 18th month, he suffered a MAJOR heart attack. His wife called, and told me the doc’s wouldn’t even operate because, and I quote, “his heart is mush.” He was in ICU, in pretty bad shape. His COBRA was thru Humana, so I called them to see how they would handle the claim after the end of the month. They replied (correctly, as I soon learned) that they wouldn’t; coverage would end at midnight on that last day.

But he’d still be in ICU, racking up a hefty-sized claim.

Fortunately, I knew that he would be a Federally Eligible Individual, and that we could get one of the HIPAA plans in place. I still recall walking into the ICU, briefcase in hand, and asking to see him. When I explained who I was, the nurses looked at me as if I’d escaped from the Psych ward upstairs [ed – insert punch line here]. Walking into his room, and seeing him with tubes and monitors arrayed before him, it was a truly moving sight. We finished the paperwork (well, all he really had to do was sign, which he could, and did), and we had coverage in place once Humana bowed out. But it is not an episode I’d care to repeat.

‘Nuff said.

A COBRA Primer Part 2…

There’s a lot of confusion about how long COBRA Continuation lasts. Generally, you can stay on COBRA until:

- 18 months from date previous coverage ends, OR

- 29 months if you become disabled during the first 60 days of your COBRA Continuation, OR

- 36 months of you were covered under a spouse’s or parent’s plan, and the spouse or parent becomes eligible for Medicare, dies, or becomes divorced or legally separated, OR

- If/when your previous employer goes out of business or drops the group plan altogether.

Remember, though, that COBRA is very complicated, and that these are general guidelines only.

When one elects COBRA one pays the full premium for the coverage. Since most employees only pay part of the premium while employed, it can come as quite a “sticker shock” to see the true cost of the coverage. And the employer can (and will) add a 2% “handling” or administrative fee on top of that. And the employer can charge 150% during the 11 month disability extension. Ouch!

There’s one more issue that needs to be addressed. While COBRA Continuation may seem like the easiest way to go if you quit or lose your job, it’s usually not the cheapest, and that 18 months goes by pretty quickly. For those with major health problems, or if you’re pregnant, it may well be the best route. But if you’re healthy, it’s generally better to get off of COBRA as quickly as possible. Individual major medical plans are usually cheaper, and you don’t have to worry that the coverage will run out in a year and a half. This is important:

Even if you’re in the hospital, in the middle of a claim, when the clock hits 18 months (or 29 or 36, see above), you’re done. There is no extension of coverage, it just ends. Needless to say, this can be a problem.

OTOH, I get calls from folks who’ve been told that they should skip COBRA and purchase a Short Term Medical plan instead. STM plans have some attractions: they are usually quite inexpensive compared to “regular” individual medical plans, they require little (if any) underwriting, and they can be issued almost immediately. But, there are drawbacks as well: they don’t cover pre-existing conditions, they’re also limited in how long they’ll last, and they are not always considered “prior coverage” for HIPAA eligibility. So be careful in considering them.

Have a great week!

A Dilemna Resolved…

For some time, I’ve been trying to determine whether or not to post on the Terri Schiavo case. For those who may not be aware, Terri is a woman who has been in a (for lack of a better term) vegetative state for many years, on a feeding tube but not life support. Her husband, citing her wish not to be kept alive by articial means, has sought to have the feeding tube removed. Her parents have sought to prevent this.

There is a great deal of controversy in this case. At first blush, this appears to be a “right-to-die” versus “pro-life” debate, and I have endeavored to keep overtly political issues from this blog. Due to various lawsuits, the cost of the care is apparently not an issue, and there don’t seem to be any obvious connections to insurance.

So why am I posting about it?

If you’ll recall, I mentioned previously that I keep a little sticker close at hand. It says: May the action that I am about to undertake be worthy of You.” Generally, this has to do with how I treat my prospects and my clients. Terri Schiavo is neither, but I feel compelled to write about this.

I have concluded that this is not a conservative vs liberal issue. It isn’t even about the right to die. We can debate all day long about whether or not someone has the right to take his own life. And it’s not about “drastic measures;” she is not on a “vent,” she will not die immediately once the tube is removed.

She will starve to death, slowly, over the next week to 10 days.

As a human being, not a conservative or liberal, I find that unconscionable. It is decidedly NOT worthy.

Here are two blogs, one right-leaning, one left-leaning, that are following this case, and have constructive suggestions for how one can become involved, or at least learn about what’s happening. I urge you to click on (at least) one:

LIBERAL

CONSERVATIVE

COBRA Primer returns Monday.

Have a great weekend!

A COBRA Primer (Part 1)…

The Consolidated Omnibus Budget Reconciliation Act of 1986, aka COBRA, was a landmark piece of legislation. One of the primary benefits of this law is that it provides for a continuation of group health coverage that otherwise might be terminated.

In English, this means that, if you lose your job, you don’t necessarily lose your insurance. This is important because, if there’s an ongoing medical condition, the coverage stays in force (at least for a while).

Since COBRA is law, and not insurance, I tend not to answer a lot of questions about it.

Why?

Simple, really: I am not a lawyer, and I don’t play one on TV.

That means that if I advise a client – especially one of my groups – on a COBRA issue, and I’m wrong (which, believe it or not, does happen)(rarely), then I could be in big trouble.

OTOH, there are times when it’s appropriate to help folks who call me determine what to do in a given circumstance.

Please keep in mind that I’ll be dealing in generalities here, but hopefully in a way that will be helpful to folks who just want some general, simple information about this complex legislation (which changes all the time).

In general, if a company has 20 or more full time employees in a given year (note: not necessarily ALL year; if there are usually 18 employees, and the boss hires 2 more full time to help during the Christmas rush, then COBRA comes into play), then it will need to be compliant with COBRA. This means that each employee, and each of their covered dependents, has certain rights. The most important one, IMHO, is that each “beneficiary” (government lingo for “person with COBRA rights”) can keep their coverage in force, with no exclusions or restrictions due to pre-existing conditions, for at least 18 months.

Why the “at least?” Well, in general (there’s that qualifier again!), each person can keep the coverage for 18 months. But some folks (for example: disabled ones) can actually keep it longer.
The biggest drawback to COBRA, in my experience, is that nowhere in that acronym are the letters AAAP (“at an affordable price”). The beneficiary has to pay the full price for the coverage, plus an additional 2% to cover the previous employer’s administrative costs. If you’re used to seeing $25 deducted from each paycheck to cover the insurance, there’s a bit of sticker shock when you see that the real amount is $400. As happens.

Okay, I’m running long here, so I’ll pick this up in the next post. Meantime, please feel free to leave a comment (or send an email) if there’s a specific topic you’d like to see me cover.

Employer-based Long Term Care coverage…

My better half, our brother-in-law, and a dear family friend all work at a local Fortune 100 company (which shall remain nameless, unless you happen to catch “Law and Order”). Like many large employers, this one offers the option of purchasing a Long Term Care insurance plan thru the magic and convenience of payroll deduction. All three have asked me to take a look at the plan(s), and render my professional, independent, expert opinion.

Such as it is.

These types of plans fall into two general categories. The first requires that, in order to keep the coverage, one must remain with the employer that offered the plan in the first place. The second type lacks this requirement; the plan is “portable,” meaning that you own it regardless of where you may work. If you leave the original employer, you’ll give up the payroll deduction benefit, and have to pay the premiums directly to the carrier. But the coverage stays the same, no benefits are lost, and the premium doesn’t increase due to this change.

Another area where such plans will differ is in the level and types of benefits offered. Because many such plans (including this one) are offered on a “guaranteed issue” basis, there is no medical underwriting. This is handy if one has on-going or substantial health problems. On the other hand, these products are priced to reflect this exposure. These plans cover nursing home stays, of course, but typically also offer additional benefits, such as increasing benefits to offset inflation, return of premium, and waiver of premium while “on claim.”

One last thing to consider: the rates for such plans (as for almost all LTCi) are NOT guaranteed. The carrier can’t raise YOUR premium based on claims or age, but can raise them for the group as a whole, usually based on their claims experience.

On a final note – and this is pure opinion – I am not sanguine about younger folks purchasing such coverage. How do I define “younger?” Good question! Really, I think those under 45 or 50 should be loading up on disability insurance coverage first. “Paycheck insurance” pays the bills, puts food on the table, and generally replaces lost wages. If one has a comprehensive disability plan (or plans) in place, THEN it may make sense to purchase LTCi.

Putting the middleman back in?

"Health care is confusing, intimidating, frustrating for everyone, and of course, it's getting more and more expensive."

No kidding.

But this article focuses on an area that, until recently, hasn’t had a lot of media play: personal health care advocates. These folks will help you make sense of the bill you just got from the hospital, or help you determine whether you need a referral for that knee surgery. And the service costs just $400 a year for a family.

I looked through their website, and they seem to offer a great array of these types of benefits. Basically, they become your personal HR department.

I have mixed feeling about this. On the one hand, as a professional agent, I expect that my clients will call me when they have questions on their bills, or an issue about coverage. So on that level, I resent that they’re paying someone else to do my job.

On the other hand, clients who use this service cease being my service problem, and I can devote more time to sales (which is how I earn a living). It’s not that I mind doing the service work – I don’t – but hey, this takes some pressure off of me, and they’re not really my competition.

But there’s a part of me that is concerned that, if and/or when there comes a major claim dispute, or a substantial coverage issue, I’m going to have to become involved anyway, but I’ll have no knowledge or records of what has transpired thus far, thereby severely hampering my ability to help resolve the problem.

I’m going to noodle on this one a while…

Late Breaking: The Sun Rises In The East…

As I mentioned the other day to 'she who must be obeyed,’ I understand that Dayton just isn’t a large enough market to support two daily newspapers.

Nonetheless, surely the Dayton Daily News could afford to hire a reporter (or three) who would at least make an effort to explore more than one side of a given issue. Today’s rant is in response to this (literally) incredible headline:

Study: Uninsured pay more for hospital care

The article, about a recent study done by the Service Employees International Union, begins by noting that a “patient without insurance coverage typically is charged more than twice as much for hospital expenses as an insured patient…”

No kidding!

In a related development, it was revealed that people with coupons paid less for a Taco Salad than those without.

Please don’t assume that I am heartless or uncompassionate about the plight of (many of) the uninsured. But nowhere in the article will you find the terms “insurance network” or “negotiated rate.” Because of such agreements, providers are PROHIBITED from charging more than a specific amount. If you’re not a party to the contract (i.e. an insured with access to network providers), then you don’t get the discount. And that is the WHOLE point of the exercise: all the rest – Medicare, medical bankruptcies, garnisheed wages – are simply red herrings. They have nothing to do with the situation. They’re there simply to make insurers and providers seem like heartless, greedy sharks. No doubt some of them are, but this does not advance the cause.

So, absent a pre-negotiated and agreed-upon set of discounts, the provider can – and should – charge what they will. It’s called the free market. Providers that charge too much, or who are unscrupulous or engage in discriminatory practices, will eventually be run out of business, or be subject to fines, or worse. Those that find ways to attract paying customers will see their business grow.

I love this conclusion: "The solution is to make sure everyone has adequate health coverage."

Yeah, like that’s worked out so well for auto insurance.

How much is Too much?

Over at California Medicine Man, several of us folks are having a mini-debate about how helpful it is for patients to research their medical conditions and treatment.

I’ve long been a proponent of consumer-driven health care, which has come to mean different things to different people. In my neck of the woods, CDHC means coupling high deductible health plans with tax-advantaged savings accounts, thereby empowering the insured/patient with the financial ability to make informed health care decisions. Implicit in this concept is the idea that, once empowered, the insured/patient will want to make the most cost-efficient decision, and will seek out as much information as possible in order to do so.

From where will this information come? Well, a variety of sources. First and foremost, the patient should be willing and able to ask the provider whether or not a given course of treatment is necessary, or whether there are more cost-effective measures that can be taken. Another resource would be, of course, the internet. Still another would be the myriad of “self-help” books about medicine in general, and a given condition in particular.

This in turn leads to other questions: How will the provider respond? How will a patient/insured know what questions to even ask? Given the ofttimes overwhelming amount of information available on the web, how does one determine what’s true and what’s not? In short, how much information is too much?

It seems to me that an educated consumer is a happier and healthier consumer. But there must be some line that, once crossed, leads to a diminishing understanding of the condition or treatment at hand. Certainly, it’s helpful – and important – to ask the provider about alternative protocols. And I think that places like WebMD can be helpful for superficial information. But I’m less certain about how much deeper one should go in such research. At some point, I think this will lead to information overload, and the insured/patient may ultimately be so confused that he chooses to do nothing.

And that is NOT “a good thing.”

“Survey says…”

Years ago, I used to love to watch “Family Feud.” Mostly, I wondered how many of the female contestants Richard Dawson would kiss. I suspect that, in today’s PC word, he wouldn’t even take the chance.

Which brings me to a phone call I received last week. One of our carriers, with whom I’ve done business for almost 20 years, called to see why I wasn’t writing very much with them lately, and if there were things they could either do, or stop doing, which might entice me to place more of my business with them.

I’m always happy to talk with carriers about these issues. For one thing, it gives me an opportunity to vent to someone at the home office. For another, I’ve become concerned lately because I’ve been putting so much business with one carrier (not the one which called), and I really value my independence. So, if I can spread a little more of the business around, I’d be happier.

In any case, we discussed some of the issues which cause an agent to use Carrier A over Carrier B. Price is important, of course, but it’s only part of the mix. I have no problem suggesting to a client that they pick Carrier B, even though their rates are a bit higher, if they offer superior service, or easier underwriting, or better plans. But the rates do need to be competitive; as it stands, Carrier B is usually 15% to 20% higher than Carrier A for similar plans, and they are much more difficult in their underwriting. Their after-sale service is superb, but you have to get the case sold - and issued - first.

Another reason I’ve been using Carrier A so much is that, unlike Carrier B (the one which called), they offer 6 different underwriting classes, versus only 3 for Carrier B. And also unlike Carrier B, they don’t “rider” (exclude) conditions or benefits. That is, if Joe Shmo has had a knee replaced, Carrier A will charge him more, but won’t exclude the knee or medications. Carrier B, tho, will often do both: exclude the condition (at least for a year or two) AND charge a higher premium. I just don’t think that’s right.

You may have noticed one aspect of the sales situation which I haven’t mentioned: commissions. Truth be told, I often don’t even know what commissions are paid on which cases. Generally, the carriers all pay more or less the same amount. So that really hasn’t been a factor in my choices of where to place business.

All in all, it was an interesting conversation (at least from my end!). I’m looking forward to seeing what, if any, changes Carrier B makes in order to increase their market share.

It’ll be interesting to watch.

The Dog That Didn’t Bark...

In the classic Sherlock Holmes case, the great detective was able to solve the mystery by the absence of a certain behavior. In essence, he could deduce the solution because something didn’t happen.

In real life, we don’t always have that luxury.

Case in point is this story from the Dayton Daily News:

“More than one-third of Montgomery County's employees in the Anthem health-insurance network switched their coverage to UnitedHealthcare last month…

Another employer with significant migration from Anthem to United was Children's Medical Center. About 200 employees there shifted during last year's normal open enrollment.”

While these may seem to be pretty substantial defections, the numbers themselves are pretty meaningless.

Why?

Well, two reasons. First, it’s a pretty poorly-kept secret that between them, Anthem and United pretty much “own” the Dayton market. There’s a joke among most of the agent/broker community that there exists a secret tunnel between the two 800# gorillas, and that each year they just swap files with each other. My point is that the story does not tell us how far – if at all – these changes deviate from the normal back-and-forth between the two carriers. It also doesn’t look to see what other factors may be involved. It’s deceptively poor logic, because it implies a correlation from facts not in evidence. For example, the implication is that Anthem has “lost” so many members solely or primarily because of the Premier kerfuffle. But would it have been helpful to know that this year, UHC’s rates were 20% less than Anthem’s? I’m not saying they were, just that rates are also important, and there is no attempt in the article to take them into account, nor to at least examine if there were other significant differences which could account for this apparently dramatic shift.

The other dog whose yelps were absent is how many UHC members have gone over to Anthem in the same time period. I have no idea, but neither does the article even bring this up. I do know that I’ve personally written Anthem business (both group and individual) even during this time, including moving cases from United to Anthem.

What does that prove? Well, frankly, nothing. Which is exactly the same as the article.

Promising New Legislation – Part II

In Part I, we discussed the first three major areas of HB and SB 5. In this post, we’ll explore the other two areas under consideration. To refresh your memory, these would be:

- Health care providers would be required to provide consumers advanced notice of health care services costs

- Proposes an analysis of a high-risk pool as a health insurance option for uninsured Ohioans, and further analysis of how to increase participation in small employer purchasing alliances.

The first item is interesting. According to my friend Bob in Hotlanta, this is being proposed in Georgia, as well: SB83 would “require hospitals and medical facilities to provide estimates of charges to patients.” I’m kinda ambivalent about this. On the one hand, when I walk into McDonald’s, there’s a sign that tells me how much that Big Mac is going to cost. So how come I can’t walk into my doc’s office and get the same thing?

Well, for one thing, everyone pays the same amount for a Big Mac; i.e. there’s no “Burger Network” or HMO. But based on contracts and negotiations, there may be a significant variation in what different patients pay, depending on with whom each is insured (just ask Anthem insured’s going to their Premier doc’s).

Finally, it’s interesting – and a little frustrating – that Ohio is one of the few states that do not currently have a high-risk pool for uninsured folks. Certainly the market is profitable enough to support this (such pools are generally funded by insurers writing business in a given state). So that’s a positive development.

I’m reserving judgment on the employer purchasing alliances. There’s an awful lot of misinformation out there about these. For one thing, they look a lot like MEWA’s to me. For another, I have often been struck by how many people buy into the “low group rate” mantra, without understanding that this is a classic oxymoron. Benefit for benefit, group plans are generally MORE expensive than individually issued plans. Why? Well first, because of the state mandated benefits built into such plans (see Part I below). Chief among these is maternity coverage, which is almost always excluded under individual plans. Finally, group insurance is guaranteed issue; that is, except for certain marketing restrictions (minimum size, participation, industry type), group carriers must issue plans to even sickly groups with high claims. Individual plans can exclude conditions, and even decline coverage.

This is definitely the “must-watch” legislation of the current session.

Promising New Legislation – Part I

House and Senate Bills 5 may blow some much-needed fresh air into the Ohio small group market. Among the proposed changes:

- New “Flexible Health Benefit Plans” would be created for small business employers

- Availability of health savings accounts (HSA) would be increased by encouraging more HMO participation

- Would allow HSA products to be reinsured through a state operated reinsurance program

- Health care providers would be required to provide consumers advanced notice of health care services costs

- Proposes an analysis of a high-risk pool as a health insurance option for uninsured Ohioans, and further analysis of how to increase participation in small employer purchasing alliances.

This post will examine the first three items on that list. I’ll cover the other two in a separate post.

I do see the overall plan as a welcome change from “business as usual.” The first two items merge well with the drive toward more consumer driven health care. The Flex Health plans envision a major reduction in the number and scope of mandated coverages. It’s been estimated that as much as 17% of the cost of health insurance is due to government-mandated benefits, often ones that most people don’t even want.

I seriously doubt that we’d see a substantial growth in the actual purchase of HSA plans due to increased marketing by HMO’s. Let’s face it, MSA’s/HSA’s have been available for a long time now, and it’s not availability that has limited their expansion in the marketplace. It’s the fundamentally flawed pricing model.

I’ll reserve judgment on the efficacy (and, indeed, the necessity) of reinsuring HSA’s. As noted above, it’s not availability that has limited their growth in the marketplace.

To be continued…