Health and Medical Insurance
Health insurance is an important part of your financial plan. As healthcare costs continue to rise, paying for medical services of any sort can take a big bite out of your wallet and your savings. Without health insurance, one serious illness or accident could be financially devastating.
Many Americans obtain health insurance in whole or in part as an employment benefit. Other consumers, including perhaps some family members of persons with health benefits, must provide for their own health insurance coverage.
This chapter provides a brief overview of various types of health insurance plans and tips for getting the most out of your healthcare plan whether you obtain it through your employer or independently. Medicare, Medicare supplement (Medigap) insurance, and long-term care insurance are also discussed.
What types of health insurance are there? | Getting the most from insurance supported by your employer
What types of health insurance are there?
Although terminology can vary slightly among insurance companies, the health insurance industry generally recognizes the following categories of health insurance plans.
- Fee-for-service — indemnity — plans (also referred to as traditional) allows you to go to any doctor or hospital. You pay a deductible (usually annual) and claims are submitted to the insurance company for reimbursement. Reimbursement is only for the medical benefits listed in your benefits summary. Preventive care is usually not included.
- Managed Care plans provide comprehensive health services to their enrollees and offer financial incentives to patients to use the providers who belong to the plan. HMOs and PPOs are the most familiar of these plans.
- HMO — Health Maintenance Organization — provides comprehensive healthcare services for a group of enrollees for a fixed, pre-paid premium. There is usually a small copayment for each doctor's visit. Preventive care is usually emphasized.
- PPO — Preferred Provider Organization — consists of a group of physicians, hospitals, and other providers who have contracted with a sponsoring group (insurer, employer, third-party administrator, etc) to provide healthcare services to covered persons in exchange for prompt payment and increased patient volume. The insured typically has copayments for each service.
- POS — Point of Service Plans — provide a combination of HMO and PPO features. An enrollee can chose to use the defined managed care program or can go out-of-plan for a service by paying the difference between the in-plan and out-of-plan cost.
- Comprehensive health insurance refers to plans that provide coverage for most types of medical expenses including preventive or wellness care. Coverage is specified in the policy usually in the form of exclusions.
- Major medical or catastrophic insurance covers expenses associated with hospitalization, surgery, and depending on the policy, radiology services, and major illnesses. These policies typically don't cover doctor visits, prescription drugs, maternity care, mental healthcare, preventive care, or wellness care. These policies have a deductible and then pay a percentage of the bills. Catastrophic policies usually have a high deductible.
- Cancer (and other specified disease or dreaded disease policies) insurance policies are types of specialty insurance that typically supplement your existing health insurance. Coverage and limitations vary from policy to policy.
Getting the most from insurance supported by your employer
Many employers provide group health insurance as a benefit. Some employers, such as large companies or the government, may offer several different plans to choose from. Here are several things to look at when comparing policies or coverage options.
- Are there policy dollar limits, such as per claim or lifetime?
- Is there a maximum amount you pay out of your own pocket each year?
- Are there any dollar limits on types of expenses, such as daily room charges or types of surgeries?
- Do you need a referral to see a specialist?
- Does it provide emergency and non-emergency coverage when you are away from home?
- Do you have to file the claims?
- Are your current doctors covered by the plan?
- What percentage of the doctors and other medical facilities in the state are covered by the plan?
- What is the annual deductible?
- What is the monthly premium?
This checklist can also be used to help you compare options in the following situations:
- Both spouses have group insurance offered through their separate employers.
- Covering children when both parents have group insurance.
The human resources department of your company should have detailed information about all the health insurance benefits offered. If not, ask for what you need. Many insurance companies also provide detailed web sites that include overviews of the company and explanations of types of plans and benefits offered. Again your company's human resources department should be able to refer you to the appropriate online resources.
What is COBRA health insurance? And what does it mean to you?
COBRA stands for The Consolidated Omnibus Budget Reconciliation Act of 1986. This law amended the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code, and the Public Health Service Act to require most group health plans to provide continuation of group health coverage that might otherwise be terminated.
The law applies to group health plans sponsored by employers with at least 20 employees, or by state and local governments. It doesn't apply to plans sponsored by the Federal government, or by churches and certain church-related organizations. Most states have enacted similar laws expanding these rights to employees of smaller companies.
COBRA continuation coverage allows you to continue participating in the group health plan for up to 18 or 36 months depending on the situation. COBRA applies to the covered employee as well as their covered spouse and dependent children. You, not your employer, pay the total cost for COBRA coverage.
Who is entitled to COBRA continuation coverage?
You must meet these three general criteria in order to be offered continuation coverage:
- Your group health plan must be covered by COBRA.
- A qualifying event must occur.
- You must be a qualified beneficiary for the event. You are a qualified beneficiary if you are covered by a group health plan on the day before a qualifying event occurs that causes you to lose coverage.
What are qualifying events?
Qualifying events for the covered employee, spouse and dependent children are:
- Voluntary or involuntary termination of employment for any reason other than “gross misconduct.”
- Reduction in the number of hours of employment
Additional qualifying events for spouses and dependent children are:
- Covered employee becomes entitled to Medicare
- Divorce or legal separation of the spouse from the covered employee
- Death of the covered employee
Additional qualifying events for dependent children are:
- Loss of dependent child status under the plan rules
How long can coverage be continued?
Coverage can be continued for up to 18 months if the qualifying event is the termination of employment or reduction of hours of employment. Coverage can be continued for up to 36 months for all other qualifying events.
Coverage can be terminated when:
- The last day of maximum coverage is reached.
- Premiums are not paid on a timely basis.
- The employer ceases to sponsor any group health plan.
- Coverage is obtained with another employer group health plan that does not have any exclusions or limitations for pre-existing conditions of a beneficiary.
- A beneficiary is entitled to Medicare benefits.
What does COBRA insurance cost?
If you pay the entire premium (100%) under the group plan (i.e., your employer doesn't pay part of the premium), then your cost for COBRA will increase no more than two percent over the premium you paid when under your previous group plan. The two percent is for administrative costs.
If your employer paid part of your health insurance premium under the group plan, then your COBRA premium will be higher because you will have to pay the employer's portion as well. You may also pay an administrative cost of not more than two percent.
You may have an option to pay premiums at some other interval besides monthly such as quarterly or weekly.
Your premium may increase during the coverage period if the costs for the plan increase but generally must be fixed in advance for each 12-month cycle.
How do you get COBRA coverage?
Your employer is required to provide you a general notice of COBRA rights within 90 days of your becoming covered under the group plan. The COBRA rights must also be described in the summary plan description (SPD).
In order for the plan to offer continuation coverage, the plan must be notified when a qualifying event occurs. Either you or your employer must notify the plan depending on the event. You must notify the plan if the qualifying event is divorce, legal separation, or a child's loss of dependent status under the plan. Otherwise, your employer must notify the plan. The SPD should provide the procedures for providing notice of a qualifying event.
Once the plan is notified, the plan must provide you with an election notice. This notice describes your rights to continuation coverage and how you make an election (choose the option you desire). Each of the qualified beneficiaries may independently elect continuation coverage. In other words, you may elect continuation coverage but your spouse could decline it. You have 60 days after the date plan coverage terminates to elect COBRA coverage.
You must receive coverage that is identical to the coverage you had before the event. If your employer offers separate health insurance plans such as medical, dental, vision, then you have the right to elect coverage in any or all of them.
If the employer changes its health insurance plan for its current employees while you are receiving COBRA, you are entitled to benefits under the new plan. You can't keep the old plan.
Providing your own health insurance
There are various circumstances where you have to provide your own health insurance. These can include the following:
- your employer doesn't provide health insurance benefits
- you are self-employed
- you retire before age 65
Group Plans. You may be able to get group insurance through a professional organization, an alumni association, or other membership type organization. In some states, a self-employed individual may qualify as a group of one. Many local chambers of commerce make group health coverage available for purchase by member businesses. This is usually a good option for small businesses with too few employees to set up a distinct group.
Individual Plans. If you can't find a group plan, then you will need to purchase an individual plan. Coverage and costs vary from company to company so you will need to look at and carefully compare policies from several companies to find one that fits your needs and budget and for which you qualify. Here are some things to consider when looking for an individual health plan:
- Which of the following do you want coverage for?
- inpatient hospital services
- outpatient surgery
- physician visits — in hospital
- office visits
- skilled nursing care
- medical tests and x-rays
- prescription drugs
- mental healthcare
- drug and alcohol abuse treatment
- home healthcare visits
- rehabilitation facility care
- nursing home care
- physical therapy
- speech therapy
- hospice care
- maternity care
- chiropractic care
- preventive care and checkups
- well-baby care
- dental care, cleaning and braces
- maternity
- mammograms
- immunizations
- vision care, exams and eyeglasses
- Do you want a fee-for-service, HMO, PPO, or POS plan?
- What are the available deductibles and premiums? How much can you save on your premium if you accept a higher deductible? A higher deductible may not save you money if the difference between the deductibles exceeds the difference between the premiums.
- What are the copayments or coinsurance for doctor visits, hospitalization, and prescriptions?
- Are there any waiting periods before coverage begins?
- Is the policy guaranteed renewable up to age 65? With a guaranteed renewable policy, as long as you pay your premiums the insurance company cannot cancel your coverage.
- Are there policy dollar limits, such as per claim or lifetime?
- Is there a maximum amount you pay out of your own pocket each year?
- Are there any dollar limits on types of expenses, such as daily room charges or types of surgeries?
- Do you need a referral to see a specialist?
- Does it provide emergency and non-emergency coverage when you are away from home?
- Do you have to file the claims?
- Are your current doctors covered by the plan?
- What percentage of the doctors and other medical facilities in the state are covered by the plan?
When applying for individual health insurance be prepared to fill out a health questionnaire. You may even need to have a physical exam. The insurance company may want to look at your medical records, too.
If you want to save money on your health insurance, then don't smoke or use tobacco. If you do smoke or use tobacco, then quit. For almost all individual health policies, smokers and tobacco users pay significantly higher premiums.
If you are shopping for an individual health insurance policy, stay alert for signs of phony health insurance plans. Often promoted as “association plans” or “union plans” these programs typically promise “low, low rates” or “no medical check (pre-existing conditions not a problem).” They may say they don't need a state license because they are regulated by the U.S. Department of Labor or are under an ERISA plan (a false claim). Protect yourself by carefully checking out any insurance company offering an individual plan: a) call your state department of insurance to make sure the plan and the agent selling it are licensed and b) check out the company using the resources in Evaluating Insurance Companies.
What should you do if a claim is denied?
Having a health insurance claim denied is not unusual. In many instances the incorrect diagnosis or procedure codes were used. Other instances are caused by not knowing what the health plan covers and what the processes are. Make sure you review your health plan's requirements so you understand the pre-approval/approval process and what treatments are covered before you need them. The best way to do this is to call the plan's customer service department and verify with them that the provider and services are covered before receiving treatment.
Keep good documentation. Write down the date, time and name of every person you talk to and notes about your conversation. Keep copies of all correspondence and paperwork.
When you do have a claim denied, take these steps:
- Call the customer service number listed on the explanation of benefits (EOB) form that you received. The representative you talk to should be able to tell you why it was denied (or not paid in full). The representative may be able to send it back through the system asking that it be reconsidered.
- If the explanation doesn't fit with your understanding of your health benefits, talk with the benefits administration person in your company. They may be able to help you resolve the issue.
- If the issue still isn't resolved, then follow the plan's appeals process. It may be called a formal review or grievance. Don't drag your feet at this point, many plans allow a limited time (usually 60 days) from the EOB date to start the appeals process. This process should allow you to see all the documentation that was used to determine your benefits.
- If the appeal doesn't solve the issue, then file a complaint with the regulator. The regulator is determined by the type of plan your employer provides.
- If your employer is a large company, then you are likely covered by a self-funded plan. This means that your employer is actually paying the claims and the outside health insurer only administers the plan. If this is the case then file your complaint with the Department of Labor's Pension and Welfare Benefits Administration (PWBA). The PWBA will make sure that your plan is being administered fairly.
- If your plan is not self-funded, then file a complaint with your state's Department of Insurance. Locate your state insurance web site using the National Association of Insurance Commissioners (NAIC) web site.
Medicare and Medicare Supplement (Medigap) Insurance
Medicare is a health insurance program provided by the Federal government for people 65 years of age or older, people under 65 with disabilities, and people with End-Stage Renal Disease (ESRD). There are two parts: A is hospital insurance, B is medical insurance.
Part A Hospital Insurance helps cover inpatient care in hospitals and skilled nursing facilities (not custodial or long-term care). Hospice and some home healthcare are also covered. Most people don't have to pay a monthly premium for part A.
Part B Medical Insurance helps cover doctors' services and outpatient care. It also covers physical and occupational therapists and some home healthcare if these are medically necessary as prescribed by your physician(s). You pay an annual deductible and monthly premium for part B. Medicare deductible and premium rates may change each January.
Medicare provides several health plans for you to choose from. These plans include:
- Original Medicare Plan is the traditional fee-for-service Medicare plan and is available nationwide. You can see any doctor or provider without referrals (provided the doctor accepts Medicare; all do not). It covers most healthcare services and supplies but doesn't cover everything. To fill in these “gaps”, you can buy a Medigap (Medicare Supplement Insurance) policy.
- Medicare Advantage Plans (previously called “Medicare + Choice Plans”) are available in most areas of the country. These plans include:
- Medicare Managed Care Plans. You see doctors in the plan's network and your care is coordinated by a primary doctor. Referrals are required for most services and to see doctors that aren't in the plan's network.
- Medicare Preferred Provider Organization Plans allow you to see any doctor but it costs less to see a doctor in the plan's network. No referrals are required.
- Medicare Private Fee-for-Service Plans allow you to see any doctor that accepts the plan's payment. No referrals are required.
- Medicare Specialty Plans provide more focused healthcare for specific people.
You may have different choices if you are enrolled in Medicaid, employer or union coverage, veterans or military retiree benefits, or have End-Stage Renal Disease.
When choosing your plan you will want to consider the following:
- What you will pay out-of-pocket?
- What extra benefits and services are covered, such as eye exams or hearing aids?
- Can you see the doctors you want to see?
- Are the doctor's offices nearby with convenient hours? Do you have to fill out claim paperwork?
- How is the quality of care? Medicare measures the quality of care and that information is available at www.medicare.gov.
Medicare can help you choose the plan that best meets your needs. You can find and compare Medicare health plans on the medicare.gov website. You can also call 1-800-MEDICARE (1-800-633-4227) and follow the instructions to speak to a Customer Service Representative.
If you are receiving Social Security benefits when you turn 65, then your Medicare Hospital Benefits start automatically (Medicare Part A). If you are not receiving Social Security, then you should sign up for Medicare close to your 65th birthday, even if you are not retired or planning to retire.
Do you need Medicare Supplement Insurance? Medicare supplement insurance is also known as “Medigap” insurance because it covers the costs of healthcare that the “original” Medicare program doesn't. If you are covered by a health insurance plan (from your workplace or other type of group policy) then you may not need a Medigap policy. A Medigap policy only works with the Original Medicare Plan. If you are enrolled in a Medicare Advantage Plan, it's illegal for anyone to sell you a Medigap policy.
Medicare Supplement Insurance is available from private insurance companies. In all states (except Massachusetts, Minnesota, and Wisconsin which have different standardized plans), a Medigap policy must be one of 10 standardized policies. Each has a different set of benefits. Two of the policies may have a high deductible option. Standardized policies may also be sold as a “Medicare SELECT” policy in which you must use specific hospitals and doctors to get full insurance benefits. Medicare SELECT policies usually cost less.
Understanding your Medicare coverage can be confusing. Each person's situation is different. The official U.S. Government site is Medicare.gov. The site has numerous publications, search tools for locating services, and other useful information. The Frequently Asked Questions section has answers to over 500 questions.
Long-Term Care Insurance
Long-term care is typically defined as assistance with the activities of daily living. Long-term care may be provided in a nursing home, assisted living facility, or in your home. Many communities have a range of services available to help with long-term care needs including visiting nurses, home health aides, friendly visitor programs, home-delivered meals, chore services, adult daycare centers, and respite services for caregivers.
- Indemnity or “per diem” policies pay up to a fixed amount regardless of what you spend.
- Expense incurred policies reimburse you for actual expenses for services received up to a fixed dollar amount per day, week, or month.
- Integrated or pooled benefits policies provide a total dollar amount that may be used for different types of long-term services. These policies usually have a daily, weekly, or monthly dollar limit for the covered long-term expenses.
What will the government pay?
- Medicare may pay for up to 100 days of care following a hosptial stay at least three days for an injury or illness.
- Medicaid, a joint federal and state program, will pay medical costs, however, qualifying for coverage requires that assets be spent down to near poverty level. Additionally, Medicaid provides very little home care, no private room coverage and dictates where you will stay.
Major Reasons to having a long-term care policy
- Asset protection: A long-term care policy may allow you to protect what you have built instead of being forced to spend your assets on providing for your day-to-day care
- Not wanting to be a burden: Your pre-planning with long-term care insurance helps reduce the stress on your spouse, children, friends, and relatives on how to pay for your care.
- Don't buy if you have enough assets such that you can afford to pay for your own care without significantly reducing your assets.
- Access to quality care: You will have the freedom to choose the type of care you will receive.
- Consider buying if you have a family history of a debilitating disease.
- Consider buying if you have no family members to take care of you.
What should you look for in a long-term care policy? If you decide that a long-term care policy is right for you then look for a policy that includes the following:
- Reputation rating of carrier.
- At least one year of nursing home or home healthcare coverage. This includes intermediate and custodial care and shouldn't be limited primarily to skilled care.
- Coverage for Alzheimer's disease and other nervous and mental disorders.
- Inflation protection options. Choices should include automatically increasing the benefit level annually or a guaranteed right to increase benefit levels periodically without evidence of insurability.
- Policy is guaranteed renewable for your lifetime and it can be canceled only for non-payment of premiums.
- Does not require the policyholder to be hospitalized first in order to receive nursing home or home healthcare benefits.
- Does not require the policyholder to first receive skilled nursing home care before receiving intermediate or custodial nursing home care.
- Does not require the policyholder to first receive nursing home care before receiving home healthcare.
In order to make a good decision, first find out what the costs are for nursing homes or home healthcare in your area. If you plan to relocate, find out the costs for that location instead.
Compare several policies using this checklist from America's Health Insurance Plans:
- What services are covered?
- nursing home care
- home healthcare
- assisted living facility
- adult daycare
- alternate care
- respite care
- other
- How much does the policy pay per day for.
- nursing home care?
- home healthcare?
- assisted living facility?
- adult daycare?
- alternate care?
- respite care?
- other?
- Does the policy have a maximum lifetime benefit? If so, what is it for:
- nursing home care?
- home healthcare?
- assisted living facility?
- other?
- Does the policy have a maximum length of coverage for each period of confinement? If so, what is it for:
- nursing home care?
- home healthcare?
- assisted living facility?
- What is the waiting period before pre-existing conditions are covered?
- What is the waiting period before benefits begin for:
- nursing home care?
- home healthcare?
- assisted living facility?
- other?
- Does the policy cover Alzheimer's disease and other organic mental and nervous disorders?
- Does the policy require:
- an assessment of activities of daily living?
- an assessment of cognitive impairment?
- physician certification of need?
- a prior hospital stay for nursing home care?
- a prior hospital stay for home healthcare?
- a prior nursing home stay for home healthcare coverage?
- other?
- Is the policy guaranteed renewable?
- What is the age range for enrollment?
- Is there a waiver-of-premium provision for:
- nursing home care?
- home healthcare?
- How long must the policyholder be confined before the premiums are waived?
- Does the policy have a nonforfeiture benefit?
- Does the policy offer an inflation adjustment feature? If so,
- what is the rate of increase?
- how often is it applied?
- for how long?
- is there an additional cost?
- What does the policy cost:
- per year?
- with inflation feature
- without inflation feature
- with nonforfeiture feature
- without nonforfeiture feature
- per month?
- with inflation feature
- without inflation feature
- with nonforfeiture feature
- without nonforfeiture feature
- Is there a 30-day free look?
Most state governments, usually the health/human services or insurance departments, provide information on long-term care insurance (and state regulations if any). To find your state's department, we suggest entering the name of your state and “long-term care insurance guide” into your favorite search engine; then look among the listings for your state office.
DCU offers long-term care insurance through DCU Financial.
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