Whenever you are shopping for a new health insurance plan, you need to know the true cost of the plan. The true cost involves more than the premium cost. It also includes out-of-pocket expenses, such as deductibles, co-pays, and coinsurance.

When evaluating health care insurance plans, be sure to ask these nine questions:

1. How much will it cost for you or your children to see a doctor?
2. How much will your laboratory tests cost?
3. How much will your x-rays cost?
4. How much will you pay if you have outpatient surgery?
5. How much will you have to pay for a hospital stay?
6. What kind of wellness benefits does the health insurance plan offer?
7. What is the actual cost of obtaining prescription medications, including co-pays?
8. Does the health insurance plan have an annual deductible? How much is it?
9. What is the maximum amount you will have to pay each for in out-of-pocket expenses?

By matching the answers to those questions to your own health history and anticipated needs, you will be able to better compare competing health insurance plans.

As I mentioned in my last post, the people of Massachusetts sent a message to Washington about health insurance reform when they rejected Martha Coakley, a supporter of the Democrat plan, and elected Scott Brown, who fiercely opposes it. The White House has been in disarray about what the election meant, but now the president is calling for a televised meeting with Republicans on February 25 to hear their proposals about health care insurance reform.

There are plenty of reasons for thinking this meeting is nothing but an empty gesture. One almost can hear Admiral Ackbar from Star Wars shouting, “It’s a trap!” Still, the Republicans will attend. As strong as some of their ideas are, I recommend changing them up a bit by adding a new wrinkle: government super funds.

For example, one of the best ways to lower healthcare costs is to cap medical malpractice awards. This would lower physician overhead by decreasing medical malpractice insurance premiums. More importantly, it would eliminate the need for doctors to practice defensive medicine, ordering endless tests, just to make sure they are not sued later for missing something. However, the typical tort reform is a non-starter with Democrats, who are heavily backed by trial lawyers.

As a compromise, Republicans could suggest that medical malpractice awards could continue to have no limits, but the medical malpractice insurance providers would be on the hook only for, say, $5 million. The government would create a super fund from taxpayer revenues to pay medical malpractice awards in excess of $5 million.

This would lower the risk for medical malpractice insurance companies, thus lowering premiums and overhead for doctors. It also would take away some of the pressure to practice defensive medicine, lowering the overall cost of health care. I suspect judges and juries might think twice about ordering $50 to $100 million medical malpractice awards if they know the taxpayer is picking up the tab.

A medical malpractice award super fund also would be transparent: the funds in it could only be used for one purpose. This would lower administrative costs and let taxpayers know where their money is going.

A second compromise would be to create an “uninsurable American” super fund. As I have touched on before, one of the main rhetorical devices used by proponents of health insurance reform is to suggest that private health insurance companies make a “practice of denying coverage to people who are seriously ill.” The uninsurable American super fund would pay for treatment for those people.

Keep in mind, however, that the uninsurable and the uninsured are two different things. Many people have many reasons for not carrying health insurance. The Democratic proposal includes fines levied by the IRS and even the threat of imprisonment to force people to buy health insurance, but it incentivizes people to not get health insurance at all by guaranteeing coverage if they do get sick. Forcing insurance companies to cover people with serious preexisting conditions takes away one of the main motivators for health people to buy health insurance and at the same time destroys the actuarial foundation of private health insurance.

The number of people who are uninsurable is infinitesimal. The vast majority of people with preexisting conditions already are covered under group health insurance, which by law cannot deny or delay coverage to people with preexisting conditions. Many people with preexisting conditions are over 65 year old, but they are covered by Medicare and are not excluded because of preexisting conditions. People with low incomes who qualify for Medicaid also are covered regardless of preexisting conditions. The same goes for children of the poor or working poor, who are covered by programs such as S-CHIP or Healthy Families. Military personnel are also covered through the VA.

The only people whose health insurance coverage is delayed or denied are people with preexisting conditions (which are rare in the first place) who are not insured through a group plan offered by their employer, are not in the military, are not 65 or older, are not poor enough to qualify for Medicaid, and are not under 18 years old in a family that makes more than about $80,000 a year. How many of these people can there possibly be?

Even if there are a million such people (which I doubt) and they all needed an average of $50,000 in health care a year (which is insane), it still would only cost $50 billion, compared to the hundreds of billions the proposed overhaul would cost.

Republicans should pre-empt false charges that they do not care about the sick by offering to cover the truly uninsurable and those with malpractice claims above $5 million by setting aside funds for just those purposes. Creating health care insurance super funds would be humane while preserving the private health insurance system that functions so well for so many right now.

Earlier this week, Massachusetts held a special election to fill the vacancy in the U.S. Senate left by Senator Edward Kennedy’s death in 2009. At first, the pundits expected Martha Coakley, the Democrat, to hold onto the seat. After all, the state has more than three times as many registered Democrats as Republicans. According to form, Coakley enjoyed more than a 20-point lead in the polls. But in the final weeks of the campaign, Coakley’s lead disappeared. On Election Day, Republican Scott Brown prevailed by a five-point margin–receiving 52% of the vote to Coakley’s 47%. The stunning turnaround left politicians and pundits sifting through the results like CSI detectives trying to make sense of what happened.

Democratic spin-meisters argued that voter discontent at the stagnant economy sank the Coakley campaign. Republicans disagreed, saying the vote was a referendum on the health insurance reform legislation passed by the Senate on Christmas Eve, in the middle of the campaign.

The vote on health care insurance reform marked the turning point in the campaign, catapulting Brown from sacrificial lamb to successor of the Lion of the Senate.

The forensic evidence supports the latter view. The health care insurance reform debate dominated the news during the campaign, and it was the central piece of legislation that a U.S. Senator would have to consider this term. Brown made the issue the centerpiece of his campaign, promising voters he would oppose it. Coakley said she would vote for it. It was left to the voters to decide.

They did. Resoundingly.

Nor were the Massachusetts voter out of step with the rest of the country. Polls indicate that scarcely more than a third of voters support the health insurance reform bill nationwide. Concerned citizens across the country are saying, “Wait. Let’s think about this. We want to improve the health care system, but this bill is not the way to do it.”

The demise of the Democrats’ filibuster-proof majority in the Senate affords the opportunity to incorporate some bi-partisan ideas into health insurance reform. For example, we can address the underlying causes of runaway healthcare costs by putting a cap on medical malpractice awards, decreasing the need for doctors to practice defensive medicine by ordering superfluous, costly tests and procedures. We can permit health insurance companies to do business across state lines, allowing healthy competition to drive down insurance costs. And we can protect the actuarial foundation of health insurance while extending health insurance coverage to the gravely ill by creating a transparent superfund to pay for the care of the truly uninsurable. These simple steps would require little in the way of bureaucracy or cost but would make private health insurance more affordable, allowing millions of people who are currently uninsured to get the coverage they need.

What are we waiting for?

Over the Christmas holidays, the Senate gave the United States the “gift” of health care insurance reform legislation.

Right now federal lawmakers are hard at work bringing the health insurance bill passed by the Senate and the one passed by the House into accord. Later this month or early next month the legislation most likely will be signed into law. This will mark a new epoch in how people go about paying for the healthcare they receive. Here are a few of the changes that appear to be coming our way:

• Those who do not have health care insurance provided through their employers, Medicare, Medicaid, or private individual insurance will be required to buy private health insurance.

• Those who do not have health insurance will be fined and possibly face criminal prosecution.

• The Internal Revenue Service (IRS) will be empowered to identify and enforce fines for noncompliance with the new regulations.

• People who earn up to 4 times the U.S. federal poverty level (about $80,000 for a family of 4) likely will qualify for tax credits to help pay for private health insurance.

• Those without health insurance might be able to purchase lower cost coverage through government-managed health insurance exchanges that require private health insurers to offer policies on a not-for-profit basis.

• Companies that employ 50 or more employees will be required to offer health care insurance if they do not already do so. Companies that do not comply with the new regulations will be fined up to $750 per employee.

• Health insurance providers will offer benefits to everyone who enrolls without limitations for preexisting conditions.

• Health insurance providers will not be allowed to charge as much as they do now based on age differences, gender differences, or any other factors that amount to higher risk.

• Health insurance companies will not be able to limit benefits paid over a lifetime of the insured.

If you are among the uninsured, I do not recommend waiting for these mandates to be implemented. That will not be until 2013 at the earliest. It is important to get some kind of policy in place now, at least to cover major medical bills that might arise from an accident or serious illness.

In addition, there will be two national elections which may or may not affect which of these provisions actually go into effect. Until then, there will be many private health insurance I will be happy to help you explore.

The media’s focus in the health insurance reform has shifted from one issue to another—the public option, Medicare buy-in, abortion funding, and the impact on the deficit. Some news outlets picked up on the point I have been making here about the long-term consequences of mandating health insurance policies that violate the basic tenets of actuarial science.

As the Senate proceeds toward passage of a bill on Christmas Eve, the media and the Congress remain silent on the most important question of all: How much will health care insurance legislation cost each American?

How much will it cost you?

Premium amount is a crucial factor in choosing health insurance. The goal of health insurance is to protect a family from a financial catastrophe, not to create one. Premiums that are too high can break a family’s budget. Debt is debt, whether you get there premium by premium or all at once in a sudden medical disaster. That is why I always seek the “sweet spot” in a health insurance policy that provides essential benefits tailored to a family’s needs while fitting comfortably within a its budget.

Forcing, coercing, or even allowing a family to buy a policy beyond its means is not sustainable.

Yet that is what Congress appears to be doing. Through its mandates, Congress is requiring every person too young for Medicare and too well off for Medicaid to buy a health insurance, without anyone knowing what it will cost them.

It’s as if I were to ask my new clients to hand me a blank check, promising to fill in the premium amount once I know what it is.

There can only be one reason for the secrecy: Premiums will go up.

Costs are bound to rise, because of the mandates in the legislation, such as requiring health insurance companies to insure those with advanced diseases and limiting the amount older people can pay to just three times the amount younger people pay, even though older people consume five times the benefits.

To accommodate these government mandates, health insurance providers will raise premiums on everyone—not just on those with high-end policies. As I have written here, younger workers will bear the brunt of the premium hikes.

How much premiums will rise is anyone’s guess. Even after the Senate’s health reform bill passes, congressional leaders will have to reconcile it with the bill passed by the House of Representatives. Amazingly, no one will know the cost of the health insurance legislation until it becomes law.

We might not know even then, because the first estimates will be based on assumptions about behavior—assumptions that might prove false. The earliest forecasts of individual costs will assume that the vast majority of the uninsured will sign up for health insurance rather than risk fines or jail, which the legislation mandates. But will they?

I doubt it. We don’t know how much the fines will be, but right now they are about $750 a year—far less than premiums will be. With unemployment at 10 percent nationwide and 12 percent in California, millions of families will opt to pay a fine than assume the new premiums.

This is especially true since the legislation simultaneously takes away one of the biggest motivators for getting insurance: fear of uninsurability. By guaranteeing that even those with the most serious illnesses can get health insurance, the new law assures scofflaws that they will have insurance when they really need it.

Lack of participation in the program create an enormous shortfall in insurance receipts. Congress will have no choice but to increase the penalties. To stay solvent, the insurance companies will have to increase premiums as well.

I will keep an eye out for estimates on what the legislation will actually cost an individual. I urge you to do the same—and share that information here in form of a comment.

For the last two months I have been hammering away at what I call the “actuarial insanity” of the health insurance reform measures put forward in both houses of Congress. Now that the House version of health insurance reform has passed, the insanity is on full display.

The House measure throws actuarial reality out the window by evening out the cost of premiums paid by younger workers and those approaching retirement (those at retirement age are already covered by Medicare). The legislation passed by the House mandates that people over 50 cannot pay more than twice as much for health care insurance as those under 50 do—this despite the fact that the over-50 crowd utilizes the health care system far more than their children and grandchildren do.

For example, people aged 60 to 64 consume 4 to 5 times as much health care as people in their 20s and 30s do. Under the current, actuarially based pricing of private health insurance, those in their 60s pay health insurance premiums that are 4 to 5 times higher than those of paid by people under 40. The House plan bans this practice, creating a massive shortfall in premiums. To recoup those lost funds, the new law increases the premiums of the younger people by as much as $1,100 a year until retirement. That might not seem so bad if you are 39, but if you just entering the workforce at age 18, it amounts to more than $50,000 over the course of your working life.

To put it another way, the natural benefit of health and vitality that younger adults enjoy will not translate into substantially lower health insurance premiums, as they do with private insurance.

The leaders of the nation’s largest membership organization, AARP (American Association of Retired People) see no problem with balancing the budget of health insurance reform on the backs of their children and grandchildren. The 40-million member organization supports shifting the costs of health care to the young—a strange stance for an organization that has as its motto, “To serve, not to be served.”

Nor is this the only government program that forces the young to pay for the old. Medicare—the federal government’s health insurance program for Americans aged 65 and above—and Social Security are funded through a 7.65% (15.3% if self-employed) Federal Insurance Contributions Act (FICA) payroll taxes paid by those in the workforce.

Both of these programs were presented to the public as forms of insurance, that is, paid for by the insured themselves over the course of their careers. This is not the case. By increasing benefits without correcting for actuarial reality, both Medicare and Social Security pay out far more than they take in from each individual. Younger and middle-aged workers underwrite the retirement of their elders.

Even so, within a decade both Social Security and Medicare will stop taking in as much money as they pay out, creating deficits.

The actuarial insanity of the House of Representatives’ health insurance mandates would not be quite as threatening to the young if they could opt out of the program. Supporters of health insurance “reform” know their scheme will never work without the financial contributions of younger workers, so the new law calls for stiff fines and even imprisonment for those who fail to obtain health insurance. It all strikes me as a strange way of bringing “fairness” to health insurance.

Health insurance reform legislation has moved to the floor of the U.S. Senate for debate. Passage of the bill could mean that 30 million people without health insurance will be required to purchase health insurance—or risk fines or imprisonment.

As an independent insurance agent who strongly believes in the importance of health care insurance, I suppose I should be thrilled that ten percent of the population will be required by law to buy what I am selling. I am not. Here’s why:

I respect the choices people make. If they choose not to do business with me or not to buy health insurance at all, I assume they have a good reason. They might not disclose what that reason is, but I’m sure it is there. People usually act in their own best interests.

Some people would rather pay for their medical expenses out of pocket, rather than locking into paying a set premium. They are betting that they will be healthy enough and safe enough from injury that their outlays for medical attention will be minimal. I wouldn’t make that bet, but others would. They believe that their lifestyle, family health history, and current health make it reasonable to run that risk. It is their choice. I would at the very least recommend that they use pre-tax dollars to pay their medical expenses by running the money through a tax-sheltered Flexible Spending Account (FSA).

Forcing these and other people onto the health insurance rolls is not going to have the effect that proponents of the health insurance bill say it will. The huge influx of the newly insured will not offset the high cost of covering those with serious pre-existing conditions. The reason is simple: If you force people to buy something, they will use it. Their resentment at the government coercion will manifest itself as a determination to get their money’s worth out of the program. Rather than minimizing their visits to the doctor, as they would if they were paying out of pocket, they will schedule appointments for anything and everything. Paying for these visits, the insurance provider—private companies or the government—will not have enough money left over to pay the high cost of the gravely ill (see my previous post regarding “actuarial insanity”).

The influx of the resentfully insured will place a tremendous strain on the healthcare delivery system. The healthcare industry already faces a shortage of nurses. In four years, when the new health insurance programs will take effect, the shortage will be worst, in part because many nurses are part of the aging Baby Boomer generation has reached retirement age. Healthcare rationing will follow, but nothing will save the private health insurance system. The government will become the sole health insurer. But it won’t be “insurance” at all, because it will not have an actuarial foundation. It will be an entitlement funded by the payroll taxes of a shrinking workforce—the same dynamic that is causing Social Security and Medicare to go broke in the next decades.

My advice: If you don’t have private health insurance, get it now. See your doctor. Make sure you get the tests and screenings you need. If you need further care, get it done. And start a savings account for future medical needs.

I realize that television journalists are required by the constraints of time to compress complex issues into one-sentence sound bites, but these oversimplifications can prove more than a little misleading. A prime example keeps coming up in the discussion of the health care insurance reforms being considered by Congress. I have heard more than one television reporter comment on “the health insurance companies’ practice of denying coverage to people with pre-existing conditions.”

The average listener cannot help but interpret that statement to mean that health insurance providers routinely deny coverage to all people with pre-existing conditions. This, however, is not the case.

On the contrary, the vast majority of people with pre-existing conditions are fully covered. This is because they obtain their health insurance through group plans provided by their employers. It is illegal to deny or delay coverage to a person with pre-existing conditions who enrolls in a group health insurance plan.

If the insurance companies can be said to have a general “practice,” it is to cover people with pre-existing conditions, not to exclude them.

Pre-existing conditions only come into play when a person seeks individual health insurance—often due to job loss, relocation, divorce, or death of a spouse. Even then, health insurance companies cannot deny coverage to people who have had “continuous coverage” as defined by the Health insurance Portability and Accountability Act (HIPPA). In addition, Medicaid and Medicare do not deny coverage to people with pre-existing conditions. That means the very young, the very old, and the very poor also are exempt from the threat of exclusion due to pre-existing conditions.

The only people who can be excluded from coverage for pre-existing conditions are those seeking individual health insurance who have not had continuous coverage. Yet the vast majority of these health insurance consumers are not denied health coverage, either. Rather, the coverage of the pre-existing condition is merely delayed for a waiting period. However, all other conditions are covered. For example, if a person has heart disease, he or she might have to pay out of pocket for heart medications and treatment for 12 to 18 months. Yet if that person becomes ill with the H1N1 flu, breaks a leg, or comes down with pneumonia, he or she is covered for those conditions.

So who, really, is denied coverage? Adults between the ages of 18 and 65 who make too much money to be covered by Medicaid, who are not eligible for group insurance, and who have a life-threatening diseases. Is this a shame? Yes. Is it common? No. Should it be addressed by Congress? Perhaps, but not by mandating coverage by private health insurance.

The foundation of all insurance—property insurance, life insurance, health insurance, etc.—is the concept of shared risk: a large number of people pay a relatively small amount of money to protect themselves against the unlikely but financially devastating cost of some kind of disaster—a home burning down, an untimely death, or a catastrophic illness. For private insurance to work, the amount of money the policyholders pay, the premium, cannot be an arbitrary number. Rather, the premium is calculated using actuarial science, which balances expected losses against expected earnings.

Requiring private health insurance companies to cover people with pre-existing conditions is an act of actuarial insanity. It forces to the health insurance providers to assume all the risk with no way of adequately sharing it. It would be like forcing car insurance companies to insure a motorist who just had an accident, and to pay for the accident. It would be like insuring a house after it has burned to the ground, or insuring a ship after it has sunk.

A better solution would be to leave actuarial integrity of private health insurance intact and have the government assume direct responsibility for the small number of people who actually are denied coverage because of serious pre-existing conditions. This will save private health insurance for the millions who benefit from it while extending help to the unfortunate few who cannot obtain coverage due to serious illnesses.

Blanket Health Insurance Agency Helps San Diego Resident Seniors!

Hi everyone! I’m Cyril Honz and I’m the owner of Blanket Health Insurance. I specialize in helping Seniors find Medicare Health Insurance that’s right for them.

I work out of my No. County, CA office and can be reached by phone at
1-800-963-400.
I love working with seniors on finding the Medicare Supplement that’s right for them. While I enjoy helping my friends and neighbors here in The San Diego area, I’ve also had experience working with consumers from across our great state of California!
I’d like to concentrate this blog entry on the topic of maximizing the advantages that come with the Medicare Supplement open enrollment period.
The open enrollment period starts on the first day of the month in which you are 65 or older and enrolled in Medicare Part B. Your open enrollment period lasts for six months. During this period, the insurer cannot: Deny you any Medicare Supplement policy they sell (You can not be denied!); charge you more due to your health; make you wait for the coverage to start! That, my friends, is a great deal!

I realize that consumers – when faced with difficult or complex buying decisions – will delay, delay, and delay some more. While I applaud any consumer who wants to carefully review their options in order to make the right, long term decision, I do want to make certain that for those of you who are either in decision-making mode right now or soon will be, you are ever mindful of the expiration date of your open enrollment period. Please do not delay past that deadline and lose out on the important advantages that come along with the open enrollment period.

I promised that I would make the advantages of open enrollment the focus of this blog entry but (Sorry!) I can’t help myself: I just want to also briefly mention the vital importance of actually owning a Medicare Supplement policy! While Medicare does offer important healthcare coverage to the average Senior, this coverage by itself leaves lots of “gaps” in coverage: Deductibles and coinsurance that you are responsible for can and do add up and can negatively impact the fixed incomes of the retired. I don’t need to tell you that the last couple of years have been brutal to so many retiree portfolios, as well as the portfolios of the soon-to-be-retired. Unlike the stock market, securing the right Medicare Supplement policy – at the right time! – is something we Seniors can control! I’m available at your convenience: I’m confident you’ll find me to be a caring, concerned health insurance professional who can also relate to the many issues facing Seniors today. Don’t feel you have to do this alone, folks: I’m here to help you make the decisions that are right for you today and all your tomorrows!

Waiting for Health Insurance Reform May Be Bad For Your Wallet
October
Hello to all our friends and neighbors in San Diego We hope your summer was fantastic and filled with joy, spent in the company of family and friends.
Recently we were talking with two fellow residents of The San Diego area who told us that they were delaying a purchasing decision on health insurance for themselves and their family because they were waiting for the “results” of President Obama’s health care reform initiative.
Friends, we made a decision very early on when we launched our blog that it would act as a service to our Health Insurance shoppers and not act as any sort of platform for political commentary. Our feeling is that you, your family, and all Americans deserve access to Affordable Health Insurance. Our goal is to be present and accounted for when you shop for your family’s or business’s health insurance and help provide you with the benefit of our experience and professional expertise throughout that process.
Referring back to the folks who told us they were “waiting on Washington” before they committed themselves to a health care plan for their family, we left those conversations feeling worried and perplexed: We believe that health care reform will likely come later rather than sooner and that the President and Congress will need to work long and hard on this issue in order to deliver viable health care legislation that meets the President’s agenda for health care reform. In other words, we just don’t feel that each and every one of us can close our eyes to the very real need for viable Health Insurance,
Folks, we don’t need to tell you that an untimely accident or health issue for any uninsured member of your family can leave your family’s finances in absolute tatters. Creating a viable health insurance safety net for yourself and your family is both a necessary and responsible action on the part of you and your spouse in the same way that responsible financial planning is crucial for your retirement years and the future educational needs of your children.
This is where Blanket Health Insurance Agency can be of value and help you with Health Insurance Assistance: Please Contact our agency and let us provide you with free, unbiased consultation on the health care plan that works best for you, your family, or your business! In this day and age of spiraling health care costs, it pays to be proactive in your health insurance planning. We’re here to help and appreciative of the trust you place in us!