ANSWERS TO QUESTIONS
ON HEALTH INSURANCE
RETURN TO ASSETS4LIFE HEALTH INSURANCE MAIN PAGE
WHAT DOES MAJOR MEDICAL MEAN?
There are a wide variety of plans referred to as health insurance available to you today, most of which will not provide the protection you want and need. These plans called Hospital Surgical, Limited Defined Benefit Plans, Hospital Indemnity Plans, and Accident and Cancer Plans. Major Medical plans are what we should all be covered by and are available both to Employees through Groups and Individuals/Families through plans licensed to sell Major Medical policies in your State. It is important to be aware that there are Major Medical plans which do not provide actual Policies licensed by and subject to the Laws of your State. Most of the plans that fit into this category are those where you join an Association in order to obtain their coverage. These plans issue a Certificate from which you access benefits from the Master Plan which is held by the Association you join. These types of Major Medical Plans are not overseen by the Insurance Department in the State you live in, and thus you have no protection from the Commissioner of Insurance of your State in case of problems.
Major Medical means that allowable and medically necessary inpatient and outpatient expenses are both covered by the main plan and its lifetime limits. You do not need to choose options with severely lower limits, in order to add Outpatient benefits to this type of plan. You might need to add Options to have features such as Doctor Copay or Prescription Copay; however, even if you fail to add these Options those service expenses are still covered by the plan subject to your annual deductible. HSA plans which do not offer Copay features for Doctors or Prescriptions are still Major Medical Plans. The word Catastrophic refers to plans with large deductibles and which frequently do not have Copay features, but they can still be Major Medical in nature.
Hospital Surgical Plans are those which cover Hospital stays and related expenses. Normal Outpatient benefits are not covered by these plans, including Doctor Office Visits, Blood Tests, X-Rays, Other Diagnostic Tests, Outpatient Therapies, and Prescriptions. Most of the Hospital Surgical Plans will cover Diagnostic Tests if performed fourteen days before or after a Hospital stay. They also usually cover Outpatient Surgical procedures.
Limited Defined Benefit Plans are those which have separate and usually severely low limits on anything they will reimburse. If there are benefits beyond a Hospital Stay, they normally must be added through very limited Options. There are many things not covered by these types of plans unless the wording specifically mentions the test or benefit. In my opinion these types of plans should be avoided by anyone healthy enough to be approved by a Major Medical Plan. Sometimes there is no other way to afford a plan other a Limited Defined Benefit Plan, and something is better than nothing.
Hospital Indemnity Plans are those where you pick a dollar amount per day the plan will pay if you end up hospitalized. The benefit is frequently paid in cash to the policy holder, and these plans have severely low limits. They may also have small benefits for surgery and some tests.
Accident and Cancer Plans are very limited plans that reimburse you for small amounts of money in case you incur an Accident or get diagnosed with specific types of Cancer. These plans are not to be confused with comprehensive health insurance.
WHAT ARE ASSOCIATION PLANS?
These are plans where you must join an Association in order to obtain their coverage. They issue a Certificate from which you access benefits from the Master Plan which is held by the Association which resides in a different State. These types of plans, which may be Major Medical Plans as well as other types of plans, are not overseen by the Insurance Department in the State you live in, and thus you have no protection from the Commissioner of Insurance of your State in case of problems. Many of these plans are offered by very fine companies and offer plan designs that can be effective and attractive; however, you need to be aware of the potential conflict presented by the fact your local State Insurance Commissioner can not help you in case of problems that may arise.
Even more critical to be aware of is that there are Associations marketing what their agents might refer to as Health Insurance which are not Major Medical plans. Companies such as Mega Life and Mid-West Life fit into this category. Their plans could best be described as Limited Defined Benefit Plans, and in my opinion leave you open to financial disaster if you have a Catastrophic illness or hospitalization. These two plans are offered by the National Association of the Self Employed and the Alliance for Affordable Health Care respectively. Other plans that are Major Medical in design and are offered by Associations are: Golden Rule, Assurant (formerly Fortis), Continental General, and Empire Fire and Marine.
WHAT ARE THE NEW HSA PLANS?
These are Major Medical Catastrophic plans recently authorized by the US Government for all Citizens. They are built with no Copay features for Doctors or Prescriptions, and have large deductibles set by the Government. They are combined with a Tax Deferred Savings Account which you must fund monthly, and can fund up to a limit based on the size of the deductible. The larger the deductible the more you can put in the Tax Deferred Savings Account. Interest accrues in the account without Taxation and you are not taxed on the money you put into the account.
The purpose of the separate Savings Account is to build up money with which to pay health related expenses that will be subject to your large annual deductible. The different companies offering this type of plan usually provide you with a Check Book from which to pay the medical expenses toward your deductible or a Debit Card for the same purpose. If you do not use the funds annually in your account, you do not lose them. They build up until you reach the Government recognized retirement age, at which you can withdraw the funds for any use without penalty.
Other than a tax shelter, and perhaps somewhat lower premiums, the only advantage to this type of plan is they come with one family deductible and coinsurance. A single person has no advantage in this respect, but it can mean a large savings to two or more people on a single plan.
PLEASE EXPLAIN 80/20 AND 50/50
These are types of Coinsurance, and you will also see others such as 70/30, 60/40 and 100. Simply put these are the percentages you have to pay after you meet your deductible up to a limit determined by the STOP LOSS. The Stop Loss is an amount of Dollars the percentage must be paid on before the plan converts to 100% coverage. An 80/20 to $10,000 for example means you will pay 20% of the next $10,000 of medical bills after your deductible. In this example the 20% will add up to $2,000. A 50/50 to $5,000 will have you paying 50% of the next $5,000 after your deductible. This example adds up to $2,500 extra out of your pocket. A 70/30 to $10,000 would likewise add $3,000 to your out of pocket expenses. A 100 plan means you do not have to pay any percentage after your deductible.
WHAT IS TOTAL MAXIMUM OUT OF POCKET?
Now this is easy to understand given the prior explanation. Total Maximum Out of Pocket is simply the addition of the Deductible and Coinsurance. From one of the examples above, an 80/20 to $10,000 combined with a plan deductible of $1,000 would have a Total Maximum Out of Pocket of $3,000. This is the total of the $1,000 deductible plus the 20% of $10,000 ($2,000). A 50/50 to $5,000 with a plan deductible of $2,500 thus has a Total Maximum Out of Pocket of $5,000. REMEMBER THAT MOST MAJOR MEDICAL PLANS REQUIRE YOU NEED A MAXIMUM OF THREE OUT OF POCKETS PER FAMILY BEFORE ALL COVERAGE GOES TO 100% FOR REMAINING FAMILY MEMBERS. Again the HSA plan only requires One Family Deductible, so you can see where your total out of pocket risk is far lower for a family with an HSA.
WHAT IS A PRE-EXISTING CONDITION?
There is much confusion today concerning the fact that Individual Major Medical Plans do have Pre-Existing Clauses. Too many people think the modern day Laws forbid companies from applying these clauses. I will address the situation in which there are no pre-existing condition clauses in the next question regarding HIPAA; however, understand that all Individual Major Medical plans are permitted to and do apply the pre-existing condition clauses
Companies vary in the way they apply the pre-existing rules. Most of them say that if you were treated for an illness or injury, or received advice recommending treatment, within the past twenty four months, it is a pre-existing condition. If you list the illness or injury that applies on the application, the company usually will no longer consider it a pre-existing illness/injury after a period of one year on the plan. If you do not list it, it will forever be a pre-existing condition. If you continue to receive treatment during the one year, or have not had treatment that was advised, it will also remain a pre-existing condition. Add to this that some illnesses/injuries will receive a Rider, and thus never be covered even after a supposed waiting period on the plan.
WHAT IS THE HIPAA LAW?
I made reference in the last question to a situation in which pre-existing rules and clauses will not apply. The HIPAA Law has a huge number of subjects it covers, and is the Law that protects you when you lose health insurance coverage under a variety of specific circumstances.
If you were covered by a Qualified Group plan, and lose coverage due to specific reasons, have been covered continuously for eighteen months without a gap in coverage, and have no other coverage available to you, you are eligible for Guaranteed Issue Health Insurance. If you meet the criteria, and you apply and are turned down for Individual Major Medical Insurance, the law forces the company to then accept you through HIPAA. The laws of each individual State set guidelines on how much more the company can charge you above their normal rates, and the rates can get extremely prohibitive.
Having no other coverage available means you have taken and exhausted COBRA if it was available, and you are not being offered a Continuation Plan. The circumstances that apply are Loss of Job, Divorce, Death of the Spouse that held a Group Plan, Moving out of the area your present plan provides coverage in, and loss of coverage because the company leaves the State. Continuous coverage for eighteen months does not have to be with one company, and the Gap referred to is sixty three days (63). If you go beyond sixty three days after losing qualified coverage, and have not applied for Individual Coverage, you have lost your protection under the HIPAA Law. If you have only worked for an employer and had their group coverage for one month, you will still be offered eighteen months of COBRA and thus have the chance to meet the rules. You MUST TAKE THE COBRA OR YOU WILL NOT BE ELIGIBLE THROUGH HIPAA. If you do not have health issues, then the need to take a COBRA and be able to obtain Guaranteed Issue is not of importance.
ARE MY DOCTORS ON THE PLAN?
This is of great significance if you purchase a PPO plan. PPO means Preferred Provider Organization and these plans have a Directory from which you should choose your Doctors and Hospitals. If you choose to seek care from a Doctor or Hospital not in the Directory you have two penalties. The first is your Coinsurance level is increased, so an 80/20 becomes a 60/40. Second is the Stop Loss and thus the Total Maximum Out of Pocket is greatly increased. Sometimes you are actually subjected to unlimited loss when you go out of network. This is obviously much more important with a Hospital Stay than a Doctor Office Visit, but is something to be taken quite seriously.
WHAT ELSE DO I NEED TO KNOW?
I hope by now you realize that picking a Health Insurance Plan is not like looking for a bargain at Wall Mart. A mistake in judgment can lead to your financial ruin and inability to get the care you need to save a life. In addition to all of the factors listed above is the incredibly hard plan language. In fact the AMERICAN MEDICAL ASSOCIATION issued a position paper to the United States Congress recently called Plans With Egregious Clauses. They feel there are plans with clauses and language that prevent them from providing safe care to their patients. I can provide you with a copy of this cry for help that our Doctors made to our Congress.
As a former Hospital, Nursing Home, and Medicare Certified Home Health Agency Administrator, I can help you understand what you need to know to select a plan for your family. Please let me help you.