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.

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.

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.