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HEALTH PLANS/POLICY: Individual association problems

Nothing really new here, but a nice piece from Lisa Girion in the LA Times about how because of the haste of insurers to avoid association groups and insure the young healthies, said groups are going into death spirals. And of course being kicked out by their plans if they can possibly figure out a reason in the fine print to do so. Today’s bete noir is Blue Shield of California which is kicking out the Association of Realtors on a technicality, but they’re obviously all at it.

Which of course means that if you’re in one of those association groups and yours get terminated and you’re sick, you’re screwed. I thank my lucky stars that when this happened to me, I was able to fool one plan into thinking that I’m healthy enough to be worth having. So far, one year later I have no claims, so they’re up!

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  1. I have been a health insurance broker for over a decade and every day I read more and more “horror” stories that are posted on the internet regarding insurance companies not paying claims, refusing to cover specific illnesses and physician’s not getting reimbursed. Unfortunately, the reality is that insurance companies are driven by profits, not people. If the insurance company can find a legal reason not to pay for something, chances are they will find it, and you, the CONSUMER will suffer. However, what many people fail to realize, is that there are very few “loopholes” in an insurance policy. The majority of the time, when health insurance is purchased, the prospective insured doesn’t even know what kind of coverage the policy is providing, so there is really no need for the insurance company to try to use a “loophole” to get out of paying for something. Any insurance agent will tell you, that the terms of coverage are right in your policy, along with a copy of the application that you signed agreeing to those terms. Most people, as soon as they get their policy, put their insurance cards in their wallet and throw their insurance policy in a drawer or filing cabinet. No one really takes the time to look through their 47-82 page policy. Therefore, since the insurance company is counting on you NOT to read your policy, no “loopholes” are actually needed for the insurance company to get out of paying a claim. Your insurance company will tell you that your policy is a legally binding contract and that you had 10 days to cancel (a 10 day free look period) when you received it, if you weren’t happy with the terms of your coverage.
    So do most policy holders really know what is in their 47-82 page health insurance policy? Yes, lots of confusing insurance jargon. Sure, the average policy holder could probably tell you how much their monthly premiums are, but can they tell you what their insurance policy doesn’t cover? Usually the policy holder doesn’t even realize what their policy doesn’t cover until they file a claim and receive a “denial letter” from the insurance company.
    Unlike car buying, where the buyer knows that the engine and transmission are standard, and that power windows and cruise control are optional, health insurance is a maze of confusion. Unfortunately, many health plans are purposefully designed to offer “limited” standard benefits. Often, coverage for other medical expenses, like “maternity” and “organ transplant” coverage are optional. Usually a policy holder doesn’t even realize that their policy doesn’t cover something “important” until they undergo medical treatment and then receive a huge bill from the hospital stating that “benefits were denied.”
    Yes, we all complain about insurance companies, but we all know that they serve a “necessary evil.” Very few of us could afford to pay for open heart surgery, if we needed it, without insurance. This being the case, how can YOU, the consumer, protect yourself against the big, bad, greedy insurance companies? And, how will you know if you are truly getting the best plan for the lowest price? Simple…buy the type of health insurance plan that you really “NEED.”
    Sure, everyone wants to have affordable, quality health insurance coverage, but in my experience, particularly dealing with the small business and self-employed market, very few people individuals can distinguish between the benefits they “want” and the benefits they really “NEED.’
    I have read many comments on various blogs about plans that cover 100% (no deductible and no-coinsurance) and I agree that those types of plans have a great “curb appeal.” However, I would not recommend to anyone that they work overtime and give up time with your family just so they could afford a plan with 100% coverage. Do those types of plans offer the policy holder greater peace of mind? Absolutely! But is 100% coverage something that the policy holder really needs? Probably not!
    Just like you would do, if you were purchasing options for a new car, you would have to weigh your “wants” vs. your “needs.” For example, although heated seats are a nice optional feature, “Do you really need heated seats if you live in Arizona?” Not unless you are planning to frequently drive to Alaska! So if you are healthy, take no medications and rarely go to the doctor, do you really need a plan with 100% coverage, and a $5 co-payment for prescription drugs? Is it really worth paying for this “option” if it costs you an additional $300 a month in insurance premiums to have this type of coverage?
    Or, is it worth $200 more a month to have a $250 deductible and a full drug card vs. an 80/20 plan with a $1,000 deductible and a discount drug card. Wouldn’t the 80/20 plan still offer you adequate coverage? Don’t you think it would be better to put that extra $200 ($2,400 per year) that you would be giving to the insurance company in premiums in your own bank account, just in case, something happens in the future and you have to pay your $1,000 deductible or buy a $12 Amoxicillin prescription? Don’t you think it is wiser to keep your hard-earned money rather than handing it over to the insurance company? Remember, the insurance company offers you NO REFUNDS on insurance premiums if you stay healthy.
    In my experience, this is one of the primary reasons that most people I speak to feel like they have been defrauded or “ripped-off” by their insurance company and/or insurance agent. In fact, time and time again I hear almost identical comments from every business owner that I speak to. Comments such as, “I have to run my business; I don’t have to be sick!” “I think I have gone to the doctor two times in the last five years.” “My insurance company keeps raising my rates and I don’t even use my insurance?”
    As a business owner myself, I can understand their frustration. Many business owners complain that it is not easy to determine what type of health insurance coverage they really need. So, is there a simple, secret formula that everyone can follow to make health insurance buying easier? Yes! Become an INFORMED Consumer. Every time I contact a prospective client or call one of my client referrals, I ask a handful of specific questions that directly relate to the policy that particular individual currently has in their filing cabinet. You know….the policy that they are relying on to protect them from having to file bankruptcy due to medical debt. The one they bought to cover that $400,000 life-saving organ transplant that they may need someday or those 40 chemotherapy treatments that they may have to undergo on an outpatient basis should they develop lung cancer.
    So what happens almost 100% of the time when I ask these individuals “BASIC” questions about their health insurance policy? They have difficulty answer them! The following are 10 questions that I frequently ask a prospective health insurance client. Let’s see how many YOU can answer without looking at your policy.
    1. What Insurance Company are you with and what is the name of your plan?
    2. What is your deductible?
    3. Do you know what your coinsurance percentage is and what dollar amount (stop loss) it is based on? (e.g. 80/20 coverage means you pay 20% of some dollar amount, what is it?)
    4. What is your maximum out of pocket expense per year? (e.g. deductibles + coinsurance + other fees)
    5. What is the Lifetime maximum benefit the insurance company will pay out if you become seriously ill and does your plan have any “per illness” maximums or caps? (e.g. the plan has a $5 million lifetime maximum, but only pays out $1 million per illness. This means that you would have to develop FIVE separate and unrelated life-threatening illnesses costing $1 million or less to qualify for $5 million of lifetime coverage)
    6. Is your plan a schedule plan, in that it only pays a certain amount for a specific list of procedures? (e.g., Mega Life & Health & Midwest National Life, a.k.a. National Association of the Self-Employed NASE)
    7. Does your plan have doctor copays and are you limited to a certain number of doctor copay visits per year? (e.g. Can only go to the doctor 2 times a year for a $20 copay?)
    9. Does your plan offer outpatient prescription drug coverage and if it does, do you pay a copay for your prescriptions or do you have to meet a separate drug deductible before you receive any benefits?
    10. Does your plan have any reduction in benefits for organ transplants and if so, what is maximum the plan will pay if you need an organ transplant? (e.g. Some plans only pay a $100,000 maximum benefit for organ transplants, but the procedure actually costs $250-$400K)
    9. Do you have to pay a separate deductible for each hospital admission or for each emergency room visit? (e.g. Some plans have a separate $750 hospital admission fee for each hospital admission which is separate from your deductible. Others have a separate $100 E.R. deductible that may be waived if you are admitted to the hospital.)
    10. Are there any restrictions, benefit “caps” or “access fees” on out-patient services, such as, physical therapy, speech therapy, chemotherapy, radiation therapy, etc.? (e.g. Some plans pay a $500 maximum for each out-patient treatment and others require you to pay a $250 “access fee” per treatment. This is usually separate from your plan deductible. So for 40 chemotherapy treatments, you would have to pay 40 x $250 = $10,000)
    So how many questions could you answer? If you couldn’t answer all ten questions either, that doesn’t necessarily mean that you are not a smart consumer? It may just mean that you just dealt with a “bad” agent, because a “great” agent would have really taken the time to help you understand your insurance benefits. A “great” asks questions to try to understand your insurance needs and recommends plans based those needs. A “great” agent takes the time to explain the difference to you regarding “needs” and “wants” and gives you enough information to weigh all of your options so you can make an informed purchasing decision. A “great” agent looks out for YOUR best interest and NOT the interest of the insurance company.
    So how do you know if you have a “great” agent? If you can answer all of the above questions without looking at your health insurance policy, you have a “great” agent. If you can answer the majority, you may have a “good” agent. If you can only answer a few, you, most likely, have a “bad” agent. Just like any other profession, there are insurance agents that really care about the clients they work with, and there are others that avoid your questions and duck your calls when you leave messages about your unpaid claims or your skyrocketing health insurance rates.
    Remember, purchasing health insurance is just as important as purchasing a house or a car, if not more important. Ask your agent a lot of questions and make sure that the answers that s/he provides are thoroughly explained to you. If you don’t feel comfortable with the coverage, price, etc. ask your agent if you can see another plan so you can make a side by side comparison before you buy. Additionally, read the “fine print” in your health plan brochure and policy and ask your agent what every asterisk (*) next to the benefit description really means.
    Furthermore, do your own due diligence. For example, if you research MEGA Life and Health, a.k.a. Midwest National Life a.k.a. National Association for the Self Employed (N.A.S.E), you will find that there have been 14 class action lawsuits brought against them since 1995. So ask yourself, “Is this a company I would trust to pay my insurance claims?
    Furthermore, ask your agent if s/he is a “captive” agent or an insurance “broker.”
    “Captive” agents can only offer ONE insurance company’s products.“Independent” agents or insurance “brokers” can offer you a variety of different insurance plans from many different companies. These plans can often be customize to meet your specific insurance needs and budget.
    Health insurance is probably one of the only things that I would not recommend buying off of the internet. In my opinion, there are too many variables to consider. A health insurance purchase requires the level of personal attention that only an insurance professional can provide. So use Ebay and Amazon for your less important purchases and use a knowledgeable, ethical and reputable insurance agent or broker for the most important purchase you will ever make….your health insurance policy.
    Lastly, if you have concerns about an insurance company or agent, contact your state’s Department of Insurance BEFORE you buy your policy. Your state’s Department of Insurance can tell you if there have been any complaints filed by policy holders against that insurance company and the reason for the complaints. If you suspect that your agent is trying to sell you a fraudulent insurance policy, (e.g. you have to join an association to qualify for health insurance, you have to become a member of a union, you have to become part of a group or a professional association) you should contact your state’s Department of Insurance to check to see if you agent is licensed and to verify that the insurance policy and insurance company are registered in your state.
    In closing, I hope I have given you enough information so you can become an INFORMED consumer. However, I remain convinced that the following words of wisdom still go along way:
    1. “If it sounds too good to be true, it probably is!”
    2. “If you only buy on price, you get what you pay for.”
    C. Steven Tucker
    Licensed Insurance Agent
    Small Business Insurance Services, Inc.
    “The Best Policy Is A Great Agent”
    http://www.smallbusinessinsuranceservices.com
    Call Toll Free: (866) SBIS123 (724-7123)

  2. Stella, I tried to research some graphs on cost increases in europe compared to the U.S. The one I was able to come up with (Century Foundation) did not show what you state. Costs are going up world wide but the rate of increase in other countries is less than the U.S. The U.S. also started out at a higher cost rate and from what I’ve seen this will continue. Are you saying that Western Europe and the U.S. health costs will at some point meet each other? I’ll look at your references.
    As to the the cost of a doctor visit, you know that the occasional simple doc visit is not really what we are all talking about when it comes to the cost of healthcare. Insurance affordability, cronic disease treatment and hospital costs are the real fear factor when it comes to affordability.

  3. “they are controlled much better. Look at every government run single pay system”
    OK, look at Western Europe. For years, most of those countries have had higher growth in their health care costs – per capita – than the U.S. “Much better control”?
    Besides, if the reason we need universal health insurance to give the government more power to cut health care spending, somebody has to inform the public that instead of more health care, we’re gonna get less. Who’s gonna do that? When?
    Oh, yeah – “20% of GDP. Think you’ll be able to afford it then?”
    I don’t know. How much will a doctors visit cost me, at “20% of GDP”? Trillions?

  4. Don,
    What I was getting at is the basics of the promises made by those who provide them, and what they are getting for their money. They promise “reduced” premiums, supposedly by dealing in “volume”.
    Wrong.
    Tell that to GM who is fully insured with THOUSANDS of members and still has a family rate of well over $1000 a month for their plan. Discount? I don’t think so. Even those who are partially or fully self insured with “association plans” could do better. And those who are unhealthy and are in an association? If they have a spouse who has ANy kind of legitimate business, they have another option, a group of 2. Section 105. Ding.

  5. Stella, cost don’t away with healthcare paid for with tax dollars but they are controlled much better. Look at every government run single pay system and you will see how costs are a lot less. No body has problems with the U.S. system except cost, which seems to be advancing to 20% of GDP. Think you’ll be able to afford it then?

  6. “Any healthcare reform has to openly discuss costs. ”
    Oh, yeah?
    Then why doesn’t THIS country openly discuss costs? Why does THIS country pretend those costs go away if they are paid with tax money?

  7. jd, I think you are right that Americans don’t understand the connection between lifestyle and good health. Part of the problem is the complexity of the interaction of genetics, pollution, toxins, food, stress, and health problems. The media does not help either when they keep contradicting health advice, coffee good, coffee bad, chocolate good, chocolate bad. All this and the fact that most docs know squat about these relationships as well, and only want to turn patients and increase billings, and you get the fatalist view that nothing makes any difference because no one knows anything anyway. My recent experience with digestive problems and a mis-diagnosis by the doc who just wanted to prescribe Nexium – WRONG, shows how hard it is to get good advise from so-called experts. Just think what long term effects I would have had if I had blindly taken him for actually knowing something.
    The only community rating that will work is mandatory coverage through the tax system where we’re all in the same pool. Then you work on education and policy to keep people from needing the health system. Couple that with taxes on harmful behavior, and maybe then people will make the connection.

  8. – Associations served a purpose for many years. When I first got into this business in 1968 the smallest group plan that could be written was 10 lives. Everything under 10 went into an Association type plan. They gave access to group coverage to thousands of people who would not have had a chance for group coverage.
    A joke no, options only apply to the healthy, individual coverage is cheaper thaqn group because individual coverage can select, they can rider out, so as long your healthy it’s great, and that is an other reason that Assocition plans fail.
    Community rating only works when you control the community, otherwise there is selection. HMO’s could function on Communitty rating as their networks were limited, once the networks expanded the walls came tumbling down.

  9. Associations are a joke anyway. The carriers let everyone believe that “volume = discount”. Wrong.
    They promise you a small percentage of a rate decrease… like you would ever know what your “normal” rate would be anyway. It’s a joke.
    I have a partner who is a tax attorney who shows realtors and others who are self employed how they can have a great insurance plan, and take it all off schedule C. He speaks across the country to groups or realtors.
    Associations are a joke, plain and simple. If they just knew their options, they’d be po’d (and they probably will be) that they were duped into buying into an association plan in the first place.

  10. There’s another dimension to the death spirals that hasn’t been discussed. Some (many? all?) of these associations were relatively loose about who they allowed to sign up under the group rates. You’d think it would be only professionals in the organization as well as immediate family members, but I know that at least in some cases friends and distant relatives were allowed to get in on the group rates. Of course, the people most motivated to do this were those who couldn’t get affordable insurance by other means because they were deemed poor risks. This tendency to attract poor risk outside the original pool accelerated the death spiral.
    The death spiral was coming anyway because the associations made joining elective and unsubsidized, so even internally the pool was going to eventually skew towards the sickest. If the price of membership in the professional association was buying the insurance (or contributing a like amount to the organization to subsidize others), then the risk pools need not have collapsed any more than they are at large employers today.
    This brings up another point I haven’t seen discussed: many of us believe that insurance mandates coupled with community rating are needed to solve the access problem. You can make them individual mandates, employer mandates, or rephrase the mandates as “paying taxes and getting government-funded universal healthcare in return,” but in any case it has to be difficult or impossible for the healthy to opt out.
    What is less clear to me is whether community rating is nearly as important as the mandates. Wouldn’t a system with experience rating and mandates work as well, so long as there was some maximum out-of-pocket expense and subsidies for the poor? In fact, such a system might work better, if the system were coupled with an education campaign to get people to connect healthier behaviors with lower costs. And in case you think
    Americans already make this connection, think again. I’m doing some work in the area now, and the level of ignorance is astounding. It’s remarkable how Americans, of all people, become fatalists when it comes to their health.

  11. Association went into it’s death spiral in the Mid 90’s with the advent of small group reform and Hippa. My personal experience with them as an underwriter is that most most bad risks to start off with. They are expensive as hell to administer and police and the good risks abandon ship when you ask for a rate adjustment, but the bad ones have no place to go. I think the only carrier that I have seen with Assoction business is the Blues and Prhaps a carrier or 2 who were trying to get into the business. The animal doesn’t exist anymore.

  12. The AHP/ SBHP legislation would have been a good thing- as it would have the potential to reduce the stranglehold that a few insurers have on the entire health payment/ health insurance market.

  13. <blockquote<insurance industry continues to grow the uninsured population, continually looking for more profitable markets Its about costs. Yes, a successful company will look at where is expenses are going and look to reduce those but when all is said or done, its about costs. The more costly healthcare is, the higher the premiums, the more uninsured. Any healthcare reform has to openly discuss costs. My suggestion for a first step is “pay for what is proven to work (as a first priority)”. We’ve just discoverd how much money has been spent on ultimately ineffective stents. And now we’re about to enter the era of breast MRI’s for everyone!

  14. The insurance industry continues to grow the uninsured population, continually looking for more profitable markets. This eventually will be the best support for single pay as the uninsured population grows to a point that it has voter clout. But I think the present push for state mandatory coverage, always within the present insurance model, will give the insurance industry a few more years of profits at the expense of premium payers. People will come to realize that their costs are not going to go down and will want a completely new system.

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