Healthcare Soundoff. Tracking Today's Vital Issues.

Finding Health Insurance Part 1 (5/11/2007)

Finding Health Insurance

The next two postings will focus on your questions about personal health insurance.

This column will address the problem retirees’ face in purchasing personal health insurance with and without pre-existing medical conditions.  The next column will look at specific benefits like mental health coverage, options for post-college graduates in their twenties, and pre-existing conditions in general.  We will also comment on different types of individual health insurance and what we think about each type.

It is important, close to retirement, to estimate you annual medical expenses and determine where you spend the most (i.e. physician visits, pharmaceuticals, diagnostic tests etc.).  Our earlier columns teach you how to do this estimate (Dan- you have the links to these columns).  Once you know the categories of health expenses you can actually shop for a benefit and premium package to meet individual needs.

Do your estimate prior to retirement, especially if you have a pre-existing condition.   The average premium for a single retiree without a pre-existing condition for the ages  55 to 64 is $350 per month.  The family premium average is $550 per month.  For people with pre-existing conditions the premium averages $600 for a single person and $900 for a family. You probably do not contribute that much currently while still employed. Employers are increasingly offering early retirement to specifically lower the cost of health insurance.

Here are the steps you should take if you are contemplating early retirement:

• Each state has different rules for individual health insurance. One insurance company may turn you down while another offers you a good premium and benefits.  Go to www.naic.org/state_web_map.htm.   Click on your state and examine the Department of Insurance web site to learn what is available.  If the web site is incomplete there will be a consumer toll free phone number for you to get one on one advice.
• Examine available benefits in light of your estimated medical expenses.  Often higher deductibles will lower premiums.  For instance if most of your expenses are for prescription drugs you can opt for a benefit that pays less for physician visits while covering your drug needs.
• If you are below 65 years of age consider using a health savings account with a higher deductible.  Refer to our column on HSAs to calculate your costs for choosing this route.
• Choose a broker or insurance agent who works with retirees.  Ask others who have opted for early retirement where they have shopped for health insurance.  Look at the large number of web sites now available to shop as well.  The best we have found are www.ehealthinsurance.com, www.anthem.com; www.uhc.com, and www.healthinsurancefinders.com.

What if you have a pre-existing condition?  Early retiree pre-existing conditions that scare health insurers most are high blood pressure, high cholesterol, and diabetes. Most health insurance claims for people between the ages of 55 and 64 are caused by these conditions.  Here are some tips if you have a pre-existing condition:

Check to see if your state has a high risk pool for health insurance.  The best resource we have found for that information is www.selfemployedcountry.org/riskpools.html. These pools are in place for people with pre-existing conditions who cannot find health insurance commercially.
Not all states have high risk pools.  The most popular states for retirement, Florida, Arizona and Nevada either does not have pools or are not accepting risks at this time.  Think twice before you change your residence to one of those states if you have a pre-existing condition and need health insurance.

If you have reached the age of 65 and qualify for Medicare you need to purchase Medigap insurance for those expenses that Medicare does not cover.  To learn about Medigap insurance use the Personal Plan Finder at www.medicare.gov.   It is easy to use and will lead you to the best alternatives.

All Medigap insurance is essentially the same.  There are 12 options.  Only two are comprehensive, Plan C and F.  Others leave significant gaps and are probably not worth the investment.  Every company that offers these plans has exactly the same benefit so you are essentially shopping on the basis of price.  The average cost for these two plans is approximately $150 per month but in some cases can be considerably higher.  Go to www.weissratings.com to compare your options.  This service has a charge but can be well worth the expenditure.

Lastly, we would recommend you purchase TheInsuranceMaze by Kimberly Lankford a columnist with Kiplinger’s Personal Finance.  The first two chapters of that book comprehensively cover the subjects discussed in this column and some of the resources we have pointed you towards are cited in that book.