HOW TO BUY Health Insurance

DO YOU NEED HEALTH INSURANCE?

To most of us, this is probably just a rhetorical question. We have all heard horror stories of families or individuals who thought they could get along without health insurance-at least temporarily. They dropped their policy or didn’t even take one out so that they would save money every month.

Then a catastrophic event happens-a major illness or an unexpected accident (are there any accidents that aren’t unexpected?).

These days just one major medical occurrence can wipe out the savings and assets of most people. And as a one person operating a small business, you also have a special need to be at work every day. If you are ever sick or injured, you need to get back to your job as quickly as possible because no one ever takes care of your business like you do-not even family, well-meaning friends or loyal employees.

But what about those "smart" people who "save" money each month by not having health insurance. Even if they put the money in the bank and save it for that possible accident or illness, it will probably not build large enough or fast enough to cover more than a minor medical condition.

And if they should contract a serious illness or suffer a major accident, they may be uninsurable for a long time (even for life in some cases).

The answer seems clear then-YES, you need health insurance. But health insurance is not like buying other goods and services. You really need to buy it when you aren’t using it. If you wait until you need it (when you’re sick or injured), you probably won’t be able to get it.

We urge you to use this information to help you save money on the health insurance you purchase. In order to understand how you can save money, you have to know a little bit about how medical expenses are escalating and how insurance policies are structured. The next sections we hope to help you in understanding a little more of this market.

WHY DOES IT COST SO MUCH?

There are more doctors, more medical services and more treatments available every day in America. And with third-party payers (insurance companies and government programs such as Medicare) making the actual payments to the doctors and medical facilities, the use of medical services has been increasing rapidly.

When you feel as though "someone else" is paying for the service, you’re more likely to agree to services and procedures you would otherwise further investigate. "That’s OK, my insurance will pay for it "has often replaced a more consumer-oriented: "Is it really necessary? Isn’t there another alternative? What is the most cost-effective approach? If I didn’t have insurance, would you still recommend this test or treatment?"

Unfortunately, even though it feels like "someone else" is paying the expenses, you are ultimately the one footing the bill. You don’t directly write the check, but excessive and unnecessary medical charges are an important factor in the rate at which insurance premiums increase for everyone.

So what can you do to help solve this problem? The answer lies in individual action to control your own costs-when you purchase your health insurance and each time you seek medical treatment. The rest of this information will help you plan out your own insurance. Needs and understand the cost containment programs that some insurance companies are now using to help you lower your cost.

THE DESIGN OF YOUR POLICY

There are several important factors in your health insurance policy that can result in cost savings for you-if you know what you and your family need. Some insurance companies allow you to choose from various options on these items. You should also try to assure that you can make changes in the future in case your needs or budget changes.

DEDUCTIBLES

A deductible is the amount of covered medical charges you must pay on your own before your policy begins to pay benefits. Generally, the higher the deductible, the lower your insurance premiums.

Many policies have a wide range of deductibles available, especially for the hospital portion of your coverage. Deductibles may range from $200, to $1000, all the way up to $10,000 or $25,000.

If you are trying to keep your insurance premiums low, while still protecting yourself from catastrophic medical expenses-the kind that could run into hundreds of thousands of dollars and force you to sell your home and other assets-you will probably want to keep your deductible fairly high. By selecting a higher deductible, your regular insurance premium payment will be lower. This would mean your out of pocket expenses would e higher if you do have an illness or injury, but you have saved money each month through lower premiums.

COINSURANCE

A coinsurance is the percentage of covered medical expenses you pay out of your own pocket after you have met your policy deductible.

While policies are available which pay 100% of covered charges, these are quite expensive. People who are more concerned with their budget have tended to look toward policies with coinsurance Probably the most popular coinsurance option available on many policies today is the 80/20 type plan.

With an 80/20 plan, after you have met your policy deductible, you pay 20% of the covered medical charges and the insurance company pays 80%.

There are other configurations of the co-payment available. Many companies offer 70/30 or 50/50 type plans. As the second number increases, it means you pay a larger percentage of the covered expenses. ?Please Keep in mind as with a PPO Plan your Coinsurance is different when you are in network and when you are out of network. While you may want to consider this type of policy when you realize how much you can save in regular insurance premium payments.

STOP-LOSS POINT

Before you make a decision on the coinsurance amount you can afford to accept, you need to determine if the policy you are considering has a "stop-loss" point. This means for your policy type, the insurance company has structured it to stop your losses at a certain level of covered expenses.

For example, if the policy has a $5000 stop-loss, you pay your payment percentage only up to $5000 stop-loss, you pay your CO-payment percentage only up to$5000 of covered medical expenses. Once your covered expenses have reached $5000, the insurance company pays benefits on all other covered expenses, up tot the maximum amount of your policy.

Some insurance companies allow you to select from various stop-loss points so that you can better control what your maximum out-of-pocket expenses might be.

OUTPATIENT EXPENSES

It is not uncommon in today's medical world with if a individual has a catastrophic illness for the some or even the majority of treatment to be handled as an outpatient. We fervently believe that it is in your best interest to have your outpatient expenses be built into the plan.

OUT-OF-POCKET COSTS

There are really three levels of out-of pocket costs you need to look at when you are considering what you wish to select in terms of deductibles, coinsurance and, co-payments .

First, you want to review what your average or general medical expenses have been in recent years and what you think they reasonably may be for the near future. For example, if you have children and you expect to have numerous outpatient expenses for minor ailments, broken bones, etc., you need to weigh this against the amount you will pay in premiums to have even minor doctors’ office visits covered by your insurance. In many cases, if you can handle the runny noses and other minor occurrences on your own, you can save money in the long run through lower insurance premiums. Or look for a plan with Doctor Visit CO-payments

Second, you need to think about how much you could reasonably cover yourself if you had serious medical expenses to contend with. For example, if you or one of your covered family members had a car accident and required extensive hospitalization, how much could you pull in from savings, how much could you cover by using a credit card, how much could you defer to a payment plan without drastically altering your own lifestyle?

These are not easy questions, nor are there any "right" answers to them. But in order to have more control over your own budget and your health insurance, you need to review them.

COST CONTAINMENT PROGRAMS

Those insurance companies which are working in your best interests to keep down costs so that your premiums will be as reasonable as possible also are now using a number of programs to contain claim costs. By keeping claim costs down, you are also working toward keeping your future premium costs down-as well as your own out-of-pocket costs.

We have listed here some of the most frequently used cost containment programs. The first four are those which you yourself can participate to make a difference.

Remember, the only way Americans can truly impact escalating health care costs is to take responsibility as consumers in each medical service purchase.

PRE-CERTIFICATION

Also known as "utilization review," this is a method to eliminate unnecessary health care services and excessive days of hospitalization.. It is used in particular before a hospitalization recommended by your doctor.

In most cases, it requires that you or your doctor call a specified phone number (usually a toll-free 800 call). The planned treatment is then reviewed with your doctor by a trained medical professional.

Expenses that could be considered unnecessary or inappropriate are discussed and a decision is reached with your doctor. In some cases they are able to reduce the number of days you will stay in the hospital (which is good news for most people, in addition to the savings in expenses!). In other cases alternate forms of treatment may be suggested that can produce the same or better level of care at a lower cost.

For example, it may be suggested that a hospitalization be short-ended by sending you home two days earlier with some home medical care to assist you.

Some insurance companies have saved million of dollars in unnecessary expenses with this program. And many patients have been able to go home sooner or remain home during treatment-and that makes most people much more comfortable.

EXAMPLE:

At an average hospital day cost of $1280, trimming 2 days off a hospitalization can have a significant effect for you.

Hospitalization of 7 Days $8960

Hospitalization of 5 Days $6400

Total Claim Savings $2560

Your out-of-pocket Savings

at a 20% CO-Payment Level $512

PPO NETWORKS

"PPO" is a term that you have probably heard more and more during recent years. It stands for "preferred provider organization" and it means that a group of medical services providers (doctors, hospitals, clinics, or other facilities) have agreed to charge lower rates to certain groups of policyholders in exchange for being put on the "preferred provider list".

The medical service providers benefit by possibly increasing the number of people they serve. You and your insurance company benefit by keeping down claim costs, your out-of-pocket costs and your future premium costs.

For example, if you are hospitalized for a treatment which would normally be billed by the hospital at $5000, a preferred provider arrangement may have set the negotiated rate at $4000. This means the total claim cost would be lower. It also means that if you have a 20% CO-payment, your out-of-pocket cost will be $200 less that it would be with a non-preferred provider.

EXAMPLE:

Regular Hospital Rate $5000 $1000

Preferred Provider Rate $4000 $ 800

Total Claim Saving $1000

Your Out-of-pocket Saving $ 200

Please remember there are different coinsurance obligations "in" or "out" of your PPO network. This is referred to as a steering mechanism. Your obligation in network could be 80/20 IN NETWORK , but 60/40 out of network. You will have a larger obligation out of network.

In addition, the savings through this type of program help keep overall claim costs down and this helps lower any future premium adjustments needed.

Some insurance companies have even gone a step further by establishing preferred provider networks of specialized hospitals and other medical facilities. In these cases, you may be eligible to receive treatment at a well-known and well-respected quality facility at a lower negotiated rate. Many people are finding that this type of cost containment program will save money as well as increase their peace of mind.

"USUAL, CUSTOMARY AND REASONABLE" REVIEW

Some insurance policies include language which specifies that benefits are based on industry standards for "usual, customary and reasonable" charges. The vast majority of medical providers’ charges come within these norms. However, a few providers’ charges are clearly beyond the scope of reasonableness and are consequently labeled as excessive. Insurance companies which closely monitor this notify providers if their charges exceed the reasonable levels. In almost all cases the medical service providers adjust their billing after they are notified. Some insurance companies use sophisticated computer software programs to determine whether specific medical charges greatly exceed those charged by other doctors and hospitals in the same geographic area.

THE INSURANCE COMPANY YOU SELECT

In addition to looking at the benefits and cost-saving measures of a health insurance company you should also consider the insurance company itself. While there are many rating systems around these days, some of them measure aspects that are really don’t relate to the service or safety you would receive as a policyholder.

It’s also important to realize that "average" rated companies with long histories in business may be more secure for you than newer companies that currently have high ratings. Those high ratings could diminish; you may be safer with a company that shows more consistency and perseverance.

There are two main areas which you should question when selecting a health insurance company:

SERVICE

Try to be sure that the company is service-oriented. They should have a standard response time for policy holder inquiries and they should tell you what it is. They should also have a standard for claim handling time on the average. You want to be sure that when you have a question or a claim that it will be handled accurately and promptly.

ASSET SAFETY

One of the best measures of security and long-term stability of an insurance company is the make-up of its investment portfolio. If its assets are secure, then you can have greater peace of mind that your future claims will be able to be paid.

Insurance is a risk business. The insurance company takes a risk when it issues you a policy. The only way to maintain your security in this risky business is to assure that the assets standing behind your policy are safe and secure.

You should look for a company that has a strong and conservative investment philosophy. It should have the vast majority of its investments in investment grade securities. While these types of investments don’t have the big yields of some junk bonds, they also do not have high risk associated with them.

In short, you want to know that:

On the next page is a list of questions you may want to ask of your health insurance agent or company to help you make your decision.

QUESTIONS TO ASK

POLICY BENEFITS AND PREMIUMS

COST CONTAINMENT

INSURANCE COMPANY

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