Healthcare Soundoff. Tracking Today's Vital Issues.

Finding Health Insurance Part 2 (5/14/2007)

HealthCareSoundoff  has received numerous questions on how to find individual health insurance.  Our previous column commented on the special situation faced by retirees.  This column answers questions posed by college graduates, COBRA recipients, people with pre-existing conditions like breast cancer, and people seeking mental health coverage.

College graduates have the most options.  They are young, generally healthy, and low risks for health insurers. Usually you can continue on your parent’s policy up to the age of 25.  But there are other options as well if you don’t get a job with health benefits.

The first is temporary health insurance.  Google “temporary health insurance” and you will find a myriad of options.  If you are healthy merely fill out a number of applications and compare price with benefits. These policies are offered by reputable companies like Golden Rule and Assurant and often provide comprehensive coverage at a great price.   If you choose a high enough deductible, premiums will often be less than $60 per month.  Maximum coverage is limited to one year.

If you are healthy consider finding a very high deductible policy with a very low premium and self-insure your basic needs by funding a health savings account.  This will not only provide tax savings but will allow you to accumulate tax fee savings.  The fund will give you good protection if you have a health event.  See our column (Dan you have the link) on health savings accounts to calculate a contribution that produces tax savings.  Often the tax savings will fund the account.

Many people are leaving their employment and embarking on a self-employed career.  Initially they are paying for health insurance using the COBRA coverage required to be offered by their former employer.  COBRA only lasts 18 months and often requires very high payments that include what your employer previously funded on your behalf while employed.  In many cases, if you do not have a pre-existing condition, you can find individual health insurance with similar benefits at a lower price.

Both college graduates and COBRA recipients should use the resources cited in our last column.  Start with www.naic.org/state_web_map.htm. Go to your state Department of Insurance site and investigate your options for individual health insurance.  The variances in premium prices for similar benefits are often significant so compare benefits with price for the best deal.  Also search the web sites we referred to for reputable individual health insurance quotes.

What if you have a pre-existing condition?  Finding individual health insurance will be more difficult.  In some cases you may be faced with signing up for your state high risk pool.  Use www.selfemployedcountry.org/riskpools.html for information on your state high risk pool.

There are other options.  Many insurance companies sell disease specific supplemental health insurance that cover specific diseases such as cancer and heart attack.  The benefits provide cash payments in the event you have health expenses associated with those diseases.  See if you can qualify for such a policy.  Google “supplemental health insurance” and investigate those listings.  We looked at www.esupplemental.com and found a number of reputable insurance companies offering this type of coverage.

After you qualify for supplemental coverage look into purchasing a comprehensive health benefit that excludes your pre-existing condition.  In many cases if you go for a year without a health event associated with your pre-existing condition you may be able to obtain comprehensive coverage for that condition.  By excluding your pre-existing condition you will probably find prices similar to those who are healthy.

In order to find the right combination of comprehensive and supplemental coverage you will probably need to work with an experienced insurance agent.  Ask around and use the yellow pages.  When you interview an agent ask them specifically for their approach and recommendations using our tips as a basis for that conversation.  Each state is different and each agent has different experiences with reputable companies.

Lastly, unless you live in a state that has community rated individual health insurance, your pre-existing condition expect to pay a much higher cost for health insurance.  Community rating is a system that state Departments of Insurance force upon health insurance companies who do business in that state.  It requires that health insurance be priced without regard to the health conditions of potential subscribers.

Mental health insurance under individual insurance policies is very limited.  We have not found an individual comprehensive health insurance policy that does not severely restrict mental health benefits.  Often it limits the number of visits to a health professional for mental health needs.  Generally that limit is 25 visits.  Inpatient benefits are capped at 30 days generally.  Prescription drug benefits for depression related needs are usually included as part of the comprehensive prescription drug benefit.  However, expect co-pays for brand name drugs to be $50 or greater.

There are two other types of health insurance policies we need to comment on.  One are discount health plans often offered over the internet.  They offer discount cards for a small month payment claiming up to 80% discounts for various health needs including physician visits, hospitalization, and drugs.  Unless the plan is regulated by your state, we do not recommend you consider them.

The second are comprehensive health policies with low limits or limited services.  They are offered by reputable companies.  They cap annual benefits at a low annual limit.  Annual caps are as low as $2,000, but some policies are higher.  If your annual medical expenditures are on average $1,000 annually, which is the majority of us, one of these policies may be useful especially if you are on a very strict budget.  If you have a health problem that requires hospitalization, remember the average hospital costs $1,450 a day or more, so a limited policy will use up the annual limit quickly and leave you without coverage.

We have some specific thoughts about individual health insurance:
 

• Most comprehensive health insurance policies are comparable to employer funded health insurance, but you will probably pay more.  If you are healthy and shop well, however, you should be able to find a good buy.

•  Purchasing health insurance with limits is not a good option.  If  you are healthy it is probably not as cost effective as paying as you go.

• Pre-existing conditions limit your choices severely in most states.  It will be difficult to find good options without a good insurance agent.

• Both supplemental health insurance and state high risk pools are acceptable and reliable alternatives for people with pre-existing conditions.

• Funding a health savings account is a smart move at any age, with or without a pre-existing condition, because it will build tax free and provide you many more alternatives later.

• Nothing will substitute for a good insurance agent who has experience with a number of health insurers and understands your options.

As we recommended in the last column, purchase TheInsurance Maze by Kimberly Lankford to further educate yourself.  We have used it as a resource for our some of our tips.
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