HEALTH INSURANCE

 
For a great many Americans, the cost of health care heads their list of worries. It's not so much the illness that causes concern as its cost. Health-care costs have risen so dramatically that even individuals with generous company-provided health insurance plans are being asked to assume an ever-larger percentage of their medical bills.

The issue of rising health-care costs takes on particular urgency for the tens of millions of Americans who can't even take advantage of employer health insurance plans. These people are confronted with having to choose between obtaining their own health insurance policies -- often at very high cost -- or taking the terrible risk of going uninsured. For those who must take the latter course, every illness, every surgical procedure, every prescription drug drains precious financial resources. Whether you enjoy the security of an employer-sponsored plan, pay for your own insurance, or are not presently insured but hope to obtain coverage, this section will help you make the most of your situation. I strongly urge you to become a well-educated consumer, not only of health-care services but also of health-care insurance. It is crucial for your long-term financial security to obtain and maintain adequate health insurance coverage -- at a reasonable cost.

The issue of national health insurance is one that won't go away -- but it's also an issue that is not likely to be resolved soon. According to a recent national survey, Americans are fed up with their health-care system. Over 60 percent believe that the system needs fundamental change. While this dissatisfaction may become a stimulus for change, it's important to remember that currently there is no national health insurance policy in existence. In other words, if you're not funding your own health insurance or if your employer is not providing such coverage for you, then, like an estimated 35 million other Americans, you're uninsured.

The consequences of lacking adequate health insurance can be devastating. The average cost of a day in the hospital is approximately $400. The average stay for a heart attack is nine days, and for a hernia, it's three days. Add such basic costs to the costs of your physician's care, and you can see how easily you could bankrupt yourself by suffering an uninsured illness.

The bottom line is, don't go a day, an hour, or a minute without making certain that you and your loved ones are adequately covered by a solid health insurance policy. Some form of universally available health care may well become available, but don't believe for a moment that you can afford to wait for its arrival.
 
 
 

EMPLOYER-SPONSORED HEALTH INSURANCE

If you work for a reasonably large corporation, you are, as far as health insurance is concerned, a member of the privileged class of America's workforce. Employees of large firms as a rule enjoy the best in employer-paid health insurance. Coverage in smaller firms can range from comprehensive to nonexistent, but usually falls short of big-company coverage. Generally, however, the smaller the company, the more difficulty it may have in coping with the rising costs of health insurance. The problems, however, cut across the board. These days, even well-insured employees of large companies are likely to receive company memos informing them of coverage changes designed to shift costs to the employee. This trend will continue, so it is all the more important that you become an educated health insurance consumer.

Employer Cost Cutting

Employers are using a wide variety of cost-cutting tools. Increasingly common practices include adding or raising deductibles, requiring employees to co-insure hospital bills, and switching from traditional health insurance plans to health maintenance organizations (HMOs) and preferred provider organizations (PPOs). (Both HMOs and PPOs are discussed later.) Some companies now require employees to discuss elective surgery with the insurance provider's medical representative. Mandatory second opinions are also becoming common. If you are employer-insured, it behooves you to pay attention to office memos and circulars about your insurance. You don't want to have any unpleasant surprises about changes to your coverage. Unfortunately, no matter how much you may dislike changes to your plan, you have little recourse but to make the best of the situation.

While you may be tempted to strike out on your own, it is very unlikely that you will benefit in the long run from opting out of your company's plan. Buying your own coverage will cost you a lot more money, or else the coverage you purchase will be much more limited than the employer-provided policy. Employer-sponsored group plans typically offer savings of 30 to 40 percent over equivalent individually purchased plans.

Understanding COBRA

Many people, especially those working in companies where layoffs have been occurring, are very concerned about losing their health insurance along with the job. Fortunately, federal law ensures continuing group health coverage for most former employees and their dependents. Passed in 1985, the Consolidated Omnibus Budget Reconciliation Act (COBRA) directs business with more than 19 employees to give employees and their family members the option of continuing group health coverage for at least 18 months after termination or resignation. The only exception -- employees who have been fired for gross misconduct.  Terminated employees who elect to take the continuing coverage must pay the entire premium plus an administrative surcharge (up to two percent of the premium). Nonetheless, even with this surcharge, the rate you pay is probably much lower than what you would pay for an individual policy.

The COBRA health-care provisions can be a godsend for many people who are "between" or who resign from work to start their own business. It has one big potential -- it only lasts for a fixed period of time. Since COBRA runs out, you will eventually need to secure your own coverage or find a job in a company with a health-care plan. Should you or any family members develop a serious health problem while covered under COBRA, you may, when COBRA expires, have a lot of difficulty obtaining good health insurance. One way to protect yourself against this eventuality is to purchase your own guaranteed renewable insurance coverage as soon as possible. Once this coverage is acquired, you can drop the "temporary" COBRA coverage.

Should you leave your job because of disability, you can receive up to 29 months of continuing health insurance coverage under COBRA's provisions. Social Security and Medicare benefits for disabled people under age 65 don't begin until 29 months after the onset of the disability, so COBRA plays an important role for these individuals. Disabled persons should be aware that employers do have the option of raising disabled employees' premiums by as much as 50 percent from the base price during the last 11 months of the 29 month period.

In addition, should you die while still employed, COBRA requires your company to continue covering at its own expense your dependents for 36 months following your demise. The law also mandates that group coverage be continued for you and your dependents under some other circumstances, including divorce.
 
 
 

HMOs  AND  PPOs

Health Maintenance Organizations

As the name implies,  provide for all your health-care needs with an emphasis on the preventive end of medicine. An HMO gives an almost total health-care service: doctors' appointments (including routine physical exams), hospital stays, operations, and in some cases prescription drugs, eyeglasses, and podiatry.  Like a conventional insurance company, an HMO typically charges a monthly premium. HMO members must go to a designated health center or centers for treatment and can usually see only physicians who are part of the HMO. If you've worked for a company that offers a choice of health-care plans, the chances are an HMO is one alternative. You may find that if you have no choice of plan, your employer has opted for an HMO. Finally, if you have to obtain your own health insurance coverage, an HMO is one alternative to consider.

The problem with HMOs is that they severely limit your choice.  Once you've chosen a doctor, he or she determines what sort of treatment you'll get and whether you will see a specialist or go to a hospital. Traditionally, if you wanted to consult a physician outside the HMO, you would be expected to pay the entire bill yourself. Now, however, some HMOs cover a portion -- sometimes as much as 75 to 80 percent -- of outside doctors' bills.

While some HMOs are in effect large, self-contained clinics, other HMOs called individual practice associations (IPAs) contract with doctors who practice in their own clinics. Each type of HMO has its drawbacks and its benefits; if you like the idea of one-stop medical shopping, however, an HMO that operates its own clinic is a very convenient way to receive care.

As with any sort of medical plan, it makes sense to understand exactly what a prospective HMO will give you in return for your premium. The following checklist will help you evaluate an HMO.
 

HMO Checklist

Does the HMO pay for extras" like

v  unlimited hospital stays

v  annual physical exams

v  eye care contact lenses

v  hearing aids

v  foot care
 
 
 

Does the HMO cover the expense of emergency care from a non-HMO provider, especially if you require care while you are outside of the HMO's region?

Does the HMO allow you to select your own doctor?

Does the HMO allow you to change doctors if you're not satisfied with the service or treatment?

Does the HMO cover the cost of a second opinion from an HMO doctor? What about from a non-HMO doctor?

Does the HMO have established procedures for redressing grievances or a hotline for customer questions and complaints?
 

Preferred Provider organizations (PPOs)

Groups of physicians sometimes band together into preferred provider organizations (PPOs) in order to provide medical care at discount rates. PPO participants generally pay little or nothing to see member physicians and hospitals, but they pay more if they go outside the PPO for treatment. PPOs are becoming an increasingly important player in the health insurance marketplace. Insurance companies and employers have come to recognize the cost-benefits of working with PPOs. A number of cooperative arrangements between insurers and PPOs have been developed recently.

Membership in a PPO can also be obtained on an individual basis. Here, they offer an interesting alternative to an HMO for the individual seeking personal health insurance coverage. PPOs combine features of HMOs and orthodox medical insurance plans into a hybrid product that allows for more flexibility. It may be the ticket for you.
 
 
 

INDIVIDUALLY PURCHASED INSURANCE AND INSURANCE FOR THE SELF-EMPLOYED
 

When you are out on your own or if your company doesn't offer coverage, obtaining medical insurance can be difficult and frustrating -- and expensive. If you are willing to shop around and put some time into your insurance hunt, however, you can probably find insurance that won't break the bank. (If you are healthy, that is. If you are already seriously ill, finding insurance is extremely tough.) There are several routes to finding a policy. You can affiliate yourself with a group so that you get coverage reasonably similar to the employer-sponsored variety, or you can get it strictly as an individual, whether from an insurance company, HMO, or PPO.

Group Coverage

One way to find coverage is to enroll in a professional or fraternal association or trade group. If you are self-employed, chances are that there is an organization established to promote the interests of your field of endeavor. Many organizations, particularly those that are based in your locale, offer their members group health insurance policies.

Be forewarned, however, that group insurance can have problems of its own. For one thing, group policies can be canceled at any time. Should the insurer decide to pull the rug out from under you, the company has no obligation to find another plan for ex-enrollees. Furthermore, since state insurance agencies don't regulate group insurance as closely as individually purchased insurance, yearly rate increases can be steep. Finally, these group policies often have low benefit limits. The upshot? Do consider group coverage if you can find it, but make sure it is comprehensive enough to meet your health-care needs.

Individual Coverage

Buying insurance individually is almost certain to be more expensive than buying it through a group plan, but finding a decent policy isn't impossible. An individual policy that is guaranteed renewable may also give you a greater degree of security than a group policy. The key to buying an individual policy is first that you, your spouse, and your dependents all be healthy enough to qualify for coverage. Next, you need to figure out how high (or low) a deductible you can afford. Get sick often? You'll probably want to pay a higher premium and obtain a lower deductible. Never been in a hospital? While you shouldn't delude yourself into thinking that you're medically invulnerable, you can probably opt for a higher deductible and a correspondingly lower monthly premium. If you can afford to co-insure the cost of certain items like hospital stays, you may also be able to shave your premium.

If you are fairly healthy, it makes sense to look at those exclusive policies that are laden with exclusions for preexisting conditions. You may have to have a physical to qualify, but the savings on a more selective health policy are well worth it. It may seem callous, but you can profit from the fact that a particular policy excludes everyone who has stubbed a toe or used cough syrup. The company will see you as an excellent risk, and your premiums will actually run lower than the national deficit. Just make sure that, should your health start to fall apart, the policy will meet your needs and continue to cover you.

On the other hand, if you have preexisting conditions, be prepared to forgo coverage on them for a period of time, often around a year. It's almost impossible to find a cost-effective policy that will cover an ailment that you have at the time of signing up. If the conditions are serious, you may have to join Blue Cross/Blue Shield or an HMO. While they have their drawbacks, most states require HMOs to have yearly enrollment periods during which they take all comers, although preexisting conditions can be excluded temporarily from the coverage.  Finally, whatever type of policy you buy, make sure that it is guaranteed renewable, so that the insurance company can't pull the rug out from under you.
 
 

SUPPLEMENTAL HEALTH INSURANCE

Excess Major Medical

Whether you own a group or individual policy or belong to an HMO, and whether your employer pays part or all of your health insurance costs, if your medical plan has a benefits ceiling, consider getting supplementary coverage. Excess major medical insurance is designed to take effect when your ordinary benefits have been exhausted. While benefit ceilings can be as low as $100,000 and sometimes even less, hospital bills of $250,000 or more have been run up by more than one unfortunate patient. The price of excess major medical is quite reasonable and may be able to be obtained as part of an umbrella liability insurance plan. Don't risk a financial disaster by having too-low limits on your health care.

Avoid These Money Wasters

Most other types of supplemental policies, such as dread disease or hospital indemnity, are a waste of good money. These policies are almost always so narrowly defined that benefits kick in under only the rarest circumstances. Dread disease insurance is often marketed as a protection against cancer-treatment cost, but while cancer is a major cause of death, your individual chances of getting the disease are still relatively small. Furthermore, even should you "luck out" and develop cancer, the policy may cover only certain parts of the disease's overall cost. Side effects and conditions related to the cancer are often not covered by these policies.

Hospital indemnity insurance is similarly useless. You've seen these policies. They offer a daily benefit of $50 or $100 while you are hospitalized. If you have good health insurance, why do you need one of these meretricious policies? If you don't have health insurance, $100 a day won't even get you through breakfast in most hospitals. Most plans take effect after you've been hospitalized for a week or longer, even though the average hospital stay is under seven days. Premiums for hospital indemnity and dread disease insurance seem low, but the chances of receiving benefits are even lower, so they end up being a big waste of money.
 
 
 

CUTTING YOUR HEALTH-CARE COSTS

As expensive as health care is today, only one thing is certain:  Health-care costs will continue to escalate. Is there anything you can do to fight back? Yes. We'd all be financially healthier if everyone took a hard look at how they use the health-care system. The following suggestions will help you and your family become better consumers of medical services and products.

Recuperate at Home

In some cases you may be able to limit your hospital stays by recuperating at home with the assistance of professional home health caregivers. Even with the expense of hiring a professional nurse, recuperating at home is still a medical bargain compared with staying in the hospital, and it's better on the psyche.

Home recuperation typically involves visits by a nurse or other health-care professional, who provides therapy or other medical services and monitors your progress. Many health plans pay 100 percent of the cost of such care for a specified number of days each year. Some insurers waive their basis plan deductibles for policyholders who take advantage of the home health-care alternative. Naturally, only your doctor can authorize at-home recovery, but before you go into the operating room, consult with your physician to see whether it might be feasible.

If recuperation can't take place at home, moving to a skilled nursing facility is an appropriate alternative to a prolonged hospital stay. Skilled nursing facilities, which are often connected with hospitals, provide around-the-clock nursing care and effective rehabilitation for far less than the cost of traditional hospital care.

Self-Audit Your Hospital Bill

Hospital bills can be long, complicated, and dense.  Nevertheless, make a point to read them over closely. Mistakes and billing errors can happen, and there's no point in overpaying. So if you are about to approve or pay a lump-sum bill, don't sign the bill and send it into the insurer or reach for your checkbook until you first receive an itemized account of the services rendered.

If you do find a charge you can't identify or are billed for a service you can't remember, ask the hospital's billing office to explain it. If it turns out you've been overcharged (as is often the case), insist that the hospital accounting office correct its error.

Ask for Generic Drugs

Most health insurance plans pay only part of the cost of the pharmaceuticals your doctor prescribes -- about 80 percent is average. Thus, if a prescription costs $20, the policyholder usually pays about $4 out of his or her own pocket, with the insurance covering the remainder. While $4 here and $5 there may not seem like much, these expenses add up. Furthermore, how many medicines cost a mere $20 these days?

In many cases, the amount you pay for prescriptions can be cut by as much as half using generic drugs. Generic drugs must pass the same food and Drug Administration tests as their brand-name equivalents. You won't compromise quality one bit by taking your medicine in generic form. If you're in doubt, ask your doctor.
 
 
 

WHEN THE SYSTEM BREAKS DOWN: CONTESTING A CLAIM

You're insured with what seems to be a good company: the terms of the policy are acceptable, and the premium and deductible are bearable. Then you file a claim and the insurance company informs you that the claim has been denied. What can you do?

When a claim is turned down, the company will usually give a reason for the denial. The first thing you must do is obtain from your employer or agent a "true copy" of your policy. If you only received a certificate with a simplified description of your coverage at the time of your enrolling in a plan, without a "true copy" you won't be able to hold your own when arguing with your insurer. If you have a group policy, your benefits booklet serves as your "true copy" of the policy.

Check the fine print of your policy to see whether the reason that your claim has been denied indeed meets the policy's rules. There is a good chance that the company is right; perhaps your agent (or your company's insurance administrator) never correctly explained your policy's terms and limitations. If, however, after carefully reading (and rereading) your policy, you are still convinced that the company, and not you, is in error, your next step depends on whether your insurance is employer-provided.

If you have an employer-sponsored plan, you should first talk to the company's benefits administrator or the company officer who acts as a liaison between your company and the insurer. The Employee Retirement Income Security Act (ERISA) requires that your employer explain to you how to file an appeal. If the insurer denies your appeal and a significant amount of money is at stake, you can sue under ERISA for the amount of benefits under contention plus legal fees. This can be an expensive and painstaking process to which you hopefully won't have to resort.

If you have an individual policy, you should call your insurer and ask to speak with a claims representative. In some cases, you may be able to resolve the problem with the representative's assistance. If the company gives you no redress, you still have legal recourse under the "bad faith" provisions of the law.