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!