This information is followed by a comprehensive list of Frequently Asked Questions to help guide you through any confusion you may have regarding insurance and how to go about getting the right coverage. If after reading this information you still have questions, please feel free to connect with us on the CONNECT page of our website.
If you have ever been sick or injured, you know how important it is to have health coverage. But if you are confused about what kind is best for you, you're not alone.
What types of health coverage are available? If your employer offers you a choice of health plans, what should you know before making a decision? In addition to coverage for medical expenses, do you need some other kind of insurance? What if you are too ill to work? Or, if you are over 65,will Medicare pay for all your medical expenses?
These are questions that today's consumers are asking; and these questions aren't necessarily easy to answer.
Making Sense of Health Insurance
The term health insurance refers to a wide variety of insurance policies. These range from policies that cover the costs of doctors and hospitals to those that meet a specific need, such as paying for long-term care. Even disability insurance which replaces lost income if you can't work because of illness or accident is considered health insurance, even though it's not specifically for medical expenses.
But when people talk about health insurance, they usually mean the kind of insurance offered by employers to employees, the kind that covers medical bills, surgery, and hospital expenses. You may have heard this kind of health insurance referred to as comprehensive or major medical policies, alluding to the broad protection they offer. But the fact is, neither of these terms is particularly helpful to the consumer.
Today, when people talk about broad health care coverage, instead of using the term "major medical," they are more likely to refer to fee-for-service or managed care. These terms apply to different kinds of coverage or health plans. Moreover, you'll also hear about specific kinds of managed care plans: health maintenance organizations or HMOs, preferred provider organizations or PPOs, and point-of-service or POS plans.
While fee-for-service and managed care plans differ in important ways, in some ways they are similar. Both cover an array of medical, surgical, and hospital expenses. Most offer some coverage for prescription drugs, and some include coverage for dentists and other providers. But there are many important differences that will make one or the other form of coverage the right one for you.
The section below is designed to acquaint you with the basics of fee-for-service and managed care plans. But remember: The detailed differences between one plan and another can only be understood by careful reading of the materials provided by insurers, your employee benefits specialist, or your agent or broker.
This type of coverage generally assumes that the medical provider (usually a doctor or hospital) will be paid a fee for each service rendered to the patient you or a family member covered under your policy. With fee-for-service insurance, you go to the doctor of your choice and you or your doctor or hospital submits a claim to your insurance company for reimbursement. You will only receive reimbursement for "covered" medical expenses, the ones listed in your benefits summary.
When a service is covered under your policy, you can expect to be reimbursed for some, but generally not all, of the cost. How much you will receive depends on the provisions of the policy on coinsurance and deductibles. Here's how it works:
• The portion of the covered medical expenses you pay is called "coinsurance." Although there are variations, fee-for-service policies often reimburse doctor bills at 80 percent of the "reasonable and customary charge." (This is the prevailing cost of a medical service in a given geographic area.) You pay the other 20 percent your coinsurance. However, if a medical provider charges more than the reasonable and customary fee, you will have to pay the difference. For example, if the reasonable and customary fee for a medical service is $100, the insurer will pay $80. If your doctor charged $100, you will pay $20. But if the doctor charged $105, you will pay $25. Note that many fee-for-service plans pay hospital expenses in full; some reimburse at the 80/20 level as described above.
• Deductibles are the amount of the covered expenses you must pay each year before the insurer starts to reimburse you. These might range from$100 to $300 per year per individual, or $500 or more per family. Generally, the higher the deductible, the lower the premiums, which are the monthly, quarterly, or annual payments for the insurance.
• Policies typically have an out-of-pocket maximum. This means that once your expenses reach a certain amount in a given calendar year, the reasonable and customary fee for covered benefits will be paid in full by the insurer. (If your doctor bills you more than the reasonable and customary charge, you may still have to pay a portion of the bill.) Note that Medicare limits how much a physician may charge you above the usual amount.
• There also may be lifetime limits on benefits paid under the policy. Most experts recommend that you look for a policy whose lifetime limit is at least $1 million. Anything less may prove to be inadequate.
The three major types of managed care plans are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.
Managed care plans generally provide comprehensive health services to their members, and offer financial incentives for patients to use the providers who belong to the plan. In managed care plans, instead of paying separately for each service that you receive, your coverage is paid in advance. This is called prepaid care.
For example, you may decide to join a local HMO where you pay a monthly or quarterly premium. That premium is the same whether you use the plan's services or not. The plan may charge a copayment for certain services for example, $10 for an office visit, or $5 for every prescription. So, if you join this HMO, you may find that you have few out-of-pocket expenses for medical care as long as you use doctors or hospitals that participate in or are part of the HMO. Your share may be only the small copayments; generally, you will not have deductibles or coinsurance.
One of the interesting things about HMOs is that they deliver care directly to patients. Patients sometimes go to a medical facility to see the nurses and doctors or to a specific doctor's office. Another common model is a network of individual practitioners. In these individual practice associations (IPAs), you will get your care in a physician's office.
If you belong to an HMO, typically you must receive your medical care through the plan. Generally, you will select a primary care physician who coordinates your care. Primary care physicians may be family practice doctors, internists, pediatricians, or other types of doctors. The primary care physician is responsible for referring you to specialists when needed. While most of these specialists will be "participating providers" in the HMO, there are circumstances in which patients enrolled in an HMO may be referred to providers outside the HMO network and still receive coverage.
PPOs and POS plans are categorized as managed care plans. (Indeed, many people call POS plans "an HMO with a point-of-service option.") From the consumer's point of view, these plans combine features of fee-for-service and HMOs. They offer more flexibility than HMOs, but premiums are likely to be somewhat higher.
With a PPO or a POS plan, unlike most HMOs, you will get some reimbursement if you receive a covered service from a provider who is not in the plan. Of course, choosing a provider outside the plan's network will cost you more than choosing a provider in the network. These plans will act like fee-for-service plans and charge you coinsurance when you go outside the network.
What is the difference between a PPO and a POS plan? A POS plan has primary care physicians who coordinate patient care; and in most cases, PPO plans do not. But there are exceptions!
HMOs and PPOs have contracts with doctors, hospitals, and other providers. They have negotiated certain fees with these providers and, as long as you get your care from these providers, they should not ask you for additional payment. (Of course, if your plan requires a copayment at the time you receive care, you will have to pay that).
Always look carefully at the description of the plans you are considering for the conditions of payment. Check with your employer, your benefits manager, or your state department of insurance to find out about laws that may regulate who is responsible for payment.
Your employer may have set up a financial arrangement that helps cover employees' health care expenses. Sometimes employers do this and have the "health plan" administered by an insurance company; but sometimes there is no outside administrator. With self-insured health plans, certain federal laws may apply. Thus, if you have problems with a plan that isn't state regulated, it's probably a good idea to talk to an attorney who specializes in health law.
HMOs, PPOs, and fee-for-service plans often share certain features, including pre authorization, utilization review, and discharge planning.
For example, you may be asked to get authorization from your plan or insurer before admission to a hospital for certain types of surgery. Utilization review is the process by which a plan determines whether a specific medical or surgical service is appropriate and/or medically necessary. Discharge planning is an approach that facilitates the transfer of a patient to amore cost-effective facility if the patient no longer needs to stay in the hospital. For example, if, following surgery, you no longer need hospitalization but cannot be cared for at home, you may be transferred to a skilled nursing facility.
Almost all fee-for-service plans apply managed care techniques to contain costs and guarantee appropriate care; and an increasing number of managed care plans contain fee-for-service elements. While the distinctions among plans are growing increasingly blurred, the number of options available to consumers increases every day.
Many people worry about coverage for preexisting conditions, especially when they change jobs. The Health Insurance Portability and Accountability Act (HIPAA) helps assure continued health insurance coverage for employees and their dependents. Starting July 1, 1997, insurers could impose only one 12-month waiting period for any preexisting condition treated or diagnosed in the previous six months. Your prior health insurance coverage will be credited toward the preexisting condition exclusion period as long as you have maintained continuous coverage without a break of more than 62 days. Pregnancy is not considered a preexisting condition, and newborns and adopted children who are covered within 30 days are not subject to the 12-month waiting period.
If you have had group health coverage for two years, and you switch jobs and go to another plan, that new health plan cannot impose another preexisting condition exclusion period. If, for example, you have had prior coverage of only eight months, you may be subject to a four-month, preexisting condition exclusion period when you switch jobs. If youâ€™ve never been covered by an employer's group plan, and you get a job that offers such coverage, you may be subject to a 12-month, preexisting condition waiting period.
Federal law also makes it easier for you to get individual insurance under certain situations, including if you have left a job where you had group health insurance, or had another plan for more than 18 months without a break of more than 62 days.
If you have not been covered under a group plan and have found it difficult to get insurance on your own, check with your state insurance department to see if your state has a risk pool. Similar to risk pools for automobile insurance, these can provide health insurance for people who cannot get it elsewhere.
What Is Not Covered?
While HMO benefits are generally more comprehensive than those of traditional fee-for-service plans, no health plan will cover every medical expense.
Very few plans cover eyeglasses and hearing aids because these are considered budgetable expenses. Very few cover elective cosmetic surgery, except to correct damage caused by a covered accidental injury. Some fee-for-service plans do not cover checkups. Procedures that are considered experimental may not be covered either. And some plans cover complications arising from pregnancy, but do not cover normal pregnancy or childbirth.
Health insurance policies frequently exclude coverage for preexisting conditions, but, as explained, federal law now limits exclusions based on such conditions.
You should also remember that insurers will not pay duplicate benefits. You and your spouse may each be covered under a health insurance plan at work but, under what is called a "coordination of benefits" provision, the total you can receive under both plans for a covered medical expense cannot exceed 100 percent of the allowable cost. Also note that if neither of your plans covers 100 percent of your expenses, you will only be covered for the percentage of coverage (for example, 80 percent) that your primary plan covers. This provision benefits everyone in the long run because it helps to keep costs down.
What Happens to My Insurance if I Lose My Job?
If you have had health coverage as an employee benefit and you leave your job, voluntarily or otherwise, one of your first concerns will be maintaining protection against the costs of health care. You can do this in one of several ways:
• First, you should know that under a federal law (the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA), group health plans sponsored by employers with 20 or more employees are required to offer continued coverage for you and your dependents for 18 months after you leave your job. (Under the same law, following an employee's death or divorce, the worker's family has the right to continue coverage for up to three years.) If you wish to continue your group coverage under this option, you must notify your employer within 60 days. You must also pay the entire premium, up to 102 percent of the cost of the coverage.
• If COBRA does not apply in your case perhaps because you work for an employer with fewer than 20 employees you may be able to convert your group policy to individual coverage. The advantage of that option is that you may not have to pass a medical exam, although an exclusion based on a preexisting condition may apply, depending on your medical history and your insurance history.
• If COBRA doesn't apply and converting your group coverage is not for you, then, if you are healthy, not yet eligible for Medicare, and expect to take another job, you might consider an interim or short-term policy. These policies provide medical insurance for people with a short-term need, such as those temporarily between jobs or those making the transition between college and a job. These policies, typically written for two to six months and renewable once, cover hospitalization, intensive care, and surgical and doctors' care provided in the hospital, as well as expenses for related services performed outside the hospital, such as X-rays or laboratory tests.
• Another possibility is obtaining coverage through an association. Many trade and professional associations offer their members health coverage often HMOs as well as basic hospital-surgical policies and disability and long-term care insurance. If you are self-employed, you may find association membership an attractive route.
Question: How do I purchase a policy?
First, an application is sent for your signature. At the same time a medical examiner contacts you to set a convenient time at your home or office to take blood and urine. On larger amounts or older ages, a resting EKG or blood pressure check may be required. It is important to give blood after a 12 hour fast so it is better to do the exam in the morning. Once the insurance company receives the exam results, the application, and any additional doctors records that the insurance company obtains at their expense, we receive an offer. Every expense in this process is paid for by the insurance company!
Question: How long does this process take?
If no doctors records are ordered, 3 to 4 weeks (Less if there is an urgency). If doctors records have to be obtained, 4-7 weeks since we are dependent on the promptness of the doctor.
Question: If I apply and don't get the rate I applied for, what happens?
The company many times will make another offer. If our office thinks we can get a better offer from another company, we will ship your file over there.
Question: Are these stable companies?
Every company our agency uses has a strong financial rating as determined by the various rating agencies such as A. M. Best, Standard and Poor's and Moody's Bond Ratings.
Question: Are these stable companies?
Every company our agency uses has a strong financial rating as determined by the various rating agencies such as A. M. Best, Standard and Poor's and Moody's Bond Ratings.
Question: What is "Preferred Plus", "Preferred", and "Standard"?
Insurance companies are learning more and more about identifying their risks. Since cancer and cardiovascular disease are the two leading causes of death where the risk can be lessened by the individual, companies zero in on these risks. Those that qualify for the super preferred would be less at risk, then the preferred, then the standard. These companies look at height and weight, blood pressure, cholesterol(good and bad), family history(relatives dying before 60 of CV disease or cancer), personal history of cancer and CV disease, and smoking history. A more specific guide is as follows:
Question: What if I don't fit into any of these categories?
If an individual has one or more of these risk factors, they may still qualify for preferred or standard. If even standard is out of the question, there are some highly rated companies that will still take the risk. Insurance companies fear the unknown. If they can identify what those risk factors are, there is a greater chance they will offer a policy. For example, someone just finds out he has a blood pressure problem and his doctor is trying different medications to bring it under control. Until the blood pressure is under control, this remains an unknown to the insurance company. Once under control it could be a preferred with some companies, standard to others.
Question: Do most companies treat pilots the same way?
No. If a pilot has enough hours to lower the risk to the insurance company, it is possible to get preferred. Two of our companies with the lowest rates will consider preferred.
Question: Do insurance companies treat all tobacco users the same?
Cigarette smokers that smoke less than a pack a day have a chance to get a non smoker rate with one company. Other companies treat pipe smokers, chewers, and cigar smokers as non smokers. Still another company gives almost all tobacco users a non smoker rate for the first 3-4 years! This same company gives a preferred rate if you use tobacco less than three to four times a year. They look at the amount of nicotine in your system.
Question: What if an instant quote is not right for me because of my special medical history?
Using the same diligence we use to find the lowest preferred rates for our customers, we will prepare a custom quote. Of course we need to know the medical condition, its duration, treatment and prognosis.
Question: Can I apply at my age?
Our agency works with individuals 18 to 85! A few companies provide policies to age 85 for term, second to die or Disclaimer insurance. Occasionally Disclaimer is available past 85.
Question: How are companies and rates selected by our agency?
A. M. Best is the industry's most recognized insurance rating organization. A.M. Best uses a letter grade to rate companies overall strength and solvency. Our agency uses only insurance companies that have at least an "A" rating with A. M. Best The top three ratings with A. M. Best are:
• A++ Superior
• A+ Superior
• A Excellent
The companies rated lower than this, generally speaking, don't have rates that are as competitive.
• Each company is slightly different, and most allow 5lbs leeway.
• No tobacco usage last 2 years.
• Cholesterol 180-220 (A couple of our companies will go as high as 230 to 250)
• Blood Pressure 140/90 (untreated)
• Family history (No deaths before age 60, siblings or parents) (sometimes one allowed) of cancer or cardiovascular disease
• Aviation - No super preferred
• Avocation (hazardous) - No super preferred
• Driving - No more than 3 moving violations in last 2 years.
• Travel- No extensive travel to underdeveloped or politically unstable countries.
If one or more of these variables are out of the guidelines, it can move you from super preferred to preferred. Even if moved to preferred these are still very competitive rates and only 5% to 10% higher. Again, the preferred rates vary between companies so it is important to try to find which company will consider you preferred. That's where we can help! The requirements vary between companies but here are some general preferred guidelines:
• Height and weight is the same as super preferred but with more leeway sometimes up to 20-25 pounds.
• Cholesterol 250 to 280
• Blood pressure 150/90 (treated or untreated)
• Family history cannot have both parents or one parent and one sibling die before age 60 of cancer or cardiovascular disease.
• Aviation - Sometimes depending on situation
• Avocation - Sometimes depending on how hazardous
• Driving - Same as super preferred
• Travel - Similar to super preferred but not as strict
These are general guidelines and will vary more from company to company than the requirements for super preferred. If after seeing your quote, you would like to discuss this with our office by e-mail, phone or fax, our office will be glad to advise. Other factors that may or may not exclude someone from preferred are:
• Current or history of alcohol/drug abuse
• Rheumatoid arthritis
• Asthma (current treatment)
• Personal history of cancer or cardiovascular disease
• Crohn's disease
• Current treatment for depression
• Diabetes (oral diabetics can get standard rates, others can get a slightly higher premium)
• Kidney/liver disease
• Mental illness