Health Insurance Explained

Here is where we are going to break the health insurance lingo into simple terminology.

There is a lot of information here and since its not necessarily a fun read, skip to the areas that concern you the most. But first I have to tell you the following (gotta love those attorney's).

Legal Notices and Disclaimer

As much as I’d love to think that every reader will follow its advice and never have a claim or bad experience with their health insurance policy, an Insurance Company or Licensed Health Insurance Agent, the truth is that I can’t promise that won’t happen to you.

The descriptions and examples given throughout this newsletter are for informational and illustration purposes only. There will only be ONE Insurance company mentioned and that is due to the nature of the relationship between the author (licensed agent) and its participating relationship with US Health Group

While all attempts have been made to verify information provided, neither I, nor any ancillary party assumes any responsibility for errors, omissions, or contradictory interpretation of the subject matter herein.

Any perceived slights of specific people or organizations are unintentional.

As a side note, if you are interested in how I came to the decision to inform more consumers about health insurance, get the story here

OK.....Let's Begin!

Deductibles

First, the deductible is what helps insurance companies guard against what is called Moral Hazard. The simple definition of this is: once a risk has no consequences, there is no incentive for people to guard against it. For example: If you were able to go to the Doctor without having any financial obligation (co-pays or deductibles), then it would be an easy assumption that many people would go to the Doctor for every simple little thing. So, a deductible is a way for the insurance company to protect themselves against those people who would “abuse” the system and drive the health insurance premiums (rates) up for everyone.

Here is the definition of a Deductible:The dollar or amount of money that the insured (patient) must pay out-of-pocket before the Insurance company will begin paying benefits. For example: Let’s say you have a $1000 deductible. You must pay this $1000 before the insurance company will begin paying any claims. Pay VERY close attention to what I am now going to explain. Industry standards state that a deductible must be met 3 times per insured, per calendar year.

Deductibles come in several dollar amounts. They can range from $250.00 - $20,000. Some people automatically assume that a lower deductible (out-of-pocket) amount is the way to go. One thing should be noted here as well. When you choose a lower deductible, your premiums are higher. If you choose a higher deductible, your premiums are lower. Many people are instantly attracted to the lower out-of-pocket amount (lower deductible) and this is not always the best choice. A little bit later I will break down some examples that should make this more clear.

So now, let’s assume you have picked a deductible that you feel comfortable with (for now, just pick a number that you can work with). Your next step in the insurance equation is to understand Co-insurance or stop / loss.

Co Insurance

So…..in plain English here is what that means.

Let’s say you have a $1,000 deductible and your policy states you have coinsurance in the amount of $4,000 maximum (stop / loss). Your plan is an 80/20 (I’ll explain this in a minute). Based on the above numbers, you would have to meet your deductible and then any other expenses above your $1,000 would be your expenses at 20%. Still with me here? Let’s look at an example:

Cost of Procedure $25,000.00 You Pay $ 1,000.00 (deductible up to 3 times per calendar year, per insured) X 3 $ 3,000.00

Coinsurance $ 4,000 (3 times per year - per insured) X 3 $12,000.00

So far, here is total out of pocket expense: $3,000 + 12,000 =$15,000Now that you have met your out-of-pocket expenses. The coinsurance example above of $4,000 is met through your 80/20 plan (or 70/30, 50/50 etc). Remember when I stated earlier I would go into more detail? Here is where all that comes into play.

Once you’ve met your deductible (example: $1,000) then you will be responsible for 20% (80/20) until you reach your $4,000 (coinsurance amount / maximum amount). After all these amounts are met, most of your expenses will be paid at 100%. However, Please READ the fine print section at the end!! It is very important!

Let’s recap.

* You must meet your annual deductible

* You pay your copays (20% example) which goes toward your annual out- of- pocket maximums ($4,000 example)

* After out-of-pocket expenses are met, in most cases, insurance company pays 100% of services.

You will find that copays are very common with PPO’s. and I will go further into detail in the next section titled PPO, HMO AND HSA

PPO, HMO, POS, HSA

PPO = Preferred Provider Organizations

* Typically offers a wider variety / choices of providers

* Premiums are similar to HMO’s

* PPO’s are able to venture outside of their provider network and are not required to have a referral from their primary physician.

* As a PPO participant, if you venture outside of the provider network, (predetermined and negotiated rates) you may have to pay a greater amount of the costs because an Out-of-Network charge has NOT been negotiated.

HMO = Health Maintenance Organization

* Participants are entitled to: Dr’s visits, preventative care and medical treatment that is through Providers who participate in the HMO network.

* Copays are typical and can range from $10-$20

* HMO’s typically ask for a participant to have a Primary Care Physician who is then able to refer patients to specialists that are within the HMO network. If a participant sees a specialist that was not referred by their primary care physician and is NOT in the HMO network, the HMO WILL NOT pay or reimburse for expenses.

POS = Point-Of-Service

* Managed care plan

* There is a designated In-Network like an HMO and PPO.

* Like a PPO, participants of a POS are able to go outside the Network. However, when a participant ventures outside the network, they are responsible for most of the cost unless their primary care physician refers them. If they are referred by their primary care physician, then the plan will pick up the cost.

HSA = Health Saving Account

These savings accounts are combined with a high-deductible health plan. Because high-deductible plans generally cost less than low-deductible plans, HSAs are a good option for employers who cannot afford a comprehensive (low-deductible) health plan.

Both employers and employees may contribute to HSAs. Total annual contributions to the savings account may be up to 100% of the annual health plan deductible amount and may be used to pay for any qualified medical expenses. The savings account is controlled by the covered employee and is intended to pay small and routine health care expenses.

Deposits made to an HSA are tax-free to the employer and employee, and money not spent at the end of the year may be rolled over to pay for future medical expenses. Money from the HSA may be withdrawn for any reason, but if it's not for qualified medical expenses as defined under §213(d) of the Internal Revenue Code, the withdrawal is subject to a 10 percent penalty and is included in gross income for income tax purposes. (The penalty is waived in a few cases: if the beneficiary dies, becomes disabled, or reaches age 65.)

The limits in 2008 are:

* $2900 For an Individual

* $5800 For a Family

A good insurance agent can help. They’re pros at making sense of the ins and outs of healthcare. They can size up your needs, and find you the right plan. To get some help, just fill out the simple form to request form to be contacted. It only takes a minute, and you’ll be on your way to finding a health insurance policy that protects your health and doesn’t cost a fortune.

Let's Keep Going

COBRA. Ever heard of it? If you haven't, let me give you a quick definition of what COBRA is.COBRA stands for :Consolidated Omnibus Budget Reconciliation Act (COBRA which requires most employers with group health plans to offer employees the option of continuing their group health coverage (temporarily) under their employer's plan if their coverage were to cease due to termination of employment or a layoff.

The one thing everyone must understand about COBRA is that it is ONLY TEMPORARY. Here is the breakdown of continuing coverge.Up to 18 months for covered employees, as well as their spouses and their dependents, when workers otherwise would lose coverage because of a termination or reduction of hours. Up to 29 months is available to employees who are determined to have been disabled at any time during the first 60 days of COBRA coverage and applies as well to the disabled employee's nondisabled qualified beneficiaries. Up to 36 months for spouses and dependents facing a loss of employer-provided coverage due to an employee's death, a divorce or legal separation, or certain other "qualifying events". Another very important note to make with regard to COBRA is that it can be quite expensive. Your premiums will definitely go up because you are now paying the full medical insurance premium that your employer was paying along with an increase of 5-10% for the administration of COBRA.

I know..........that wasn't necessarily pleasant information if you are contemplating COBRA (sorry) but you ABSOLUTELY need to understand the basic premise behind COBRA. If you are a healthy individual, it would be in your best interest to find health coverage through another source vs. keeping or signing up for COBRA.

OK.........here's one more option. This option is available in most states but I am only going to give you the one here in Texas If you are unable to obtain any form of insurance (due to uninsurable circumstances) through an outside source, you may qualify for the Texas Risk Pool This is can be expensive insurance but it is certainly worth checking out if you have exhausted your resources and not found anyone who will insure you.

Discount Drug Plan

I'm not going to spend much time on this because its all pretty simple. Here is a real quick summary of discount drug plans:

* If you take a lot of medication and cannot afford to have a regular health policy, GET A DISCOUNT DRUG PLAN (fill out the form below and I'll send you some information via email)

* Deductibles are typically very low. The down side is that a lot of them don't have a large Calendar year expenditure. For example, the discount drug plan may put a cap (maximum) on your allowable amount you can use on prescriptions.

Just remember these are not health insurance policies.

Agents

The cold hard truth is that there really are agents out there that mean the best but just don't know how to explain things. You also have those agents that just don't have a clue and only really know what their Managers have "taught" them. Not such a great picture when you are making some pretty serious decisions with your health and life.

Unfortunately in this line of business, most people frown upon those of us in this line of business. It's a tough boat to row when you are coming behind another agent that has completely manipulated the NEEDS of his/her client to benefit them! As much as I hate to say it, it does happen. However, every coin has two sides and there are those of us who work very hard to maintain a strong sense of ethics and morals and truly have our clients best interest in mind.

With that being said, if at any time you feel like you are not being provided with the best information, service and care when making your Health care coverage decisions, you should immediately find someone who does not want to shove a bunch of information your way, hastily explain it, and ask for you to sign on the dotted line.In other words, FIRE THEM! C'mon.........did you buy your car like that? How about your first house? I didn't think so! So why on earth do people feel like they should just "trust" what someone else tells them in a matter of 30 minutes? This is where I scratch my noggin!

For the most part, agents really do mean well but some have just not had the correct training or taken the initiative to explore the answers on their own. That's ok because now that you have received the "GOODS" and I've done the work (whew!) you can explain to your agent WHAT YOU WANT and WHY YOU WANT IT YOUR WAY! After all, it is YOUR NEEDS you are taking care of right?

Before I move on, I have to say one last thing about insurance agents. I have met some of the greatest people through this industry and I will continuously seek out those that stand out from the crowd.........LIKE ME :-) !! We're not all bad. Sometimes it just takes surfing the web and finding the right resources for you to reap the rewards and benefits of someone who wants to change this........... one health insurance policy at a time! Ok.....enough about other agents!

Now I'm going to give you more in depth illustrations of how certain plans work. The following illustration is going to make you realize that you may want to re-evaluate how you look at Health coverage.

I'm going to compare a traditional plan (PPO or HMO) to an HSA.Hsa's stand out all on their own due to benefits that are not available on the other plans so that is why I am using those as examples. Also, the following illustration is from a REAL scenario and I am using REAL numbers from a new clients situation (they had a traditional PPO plan). We compared their policy to an HSA policy and here is the outcome:

                                              Traditional Plan          HSA Plan

Premium	$800	$420.00
Deductible	$2500	$10,000
CoInsurance	$4000	$ 0
CoPay	$20.00	$ 0

Premium Totals: $ 9,600.00 ($800 x 12) For Traditional Plan $ 5,040.00 ($420 x 12) For HSA Plan

There is a $ 4,560.00 dollar savings between a traditional plan vs an HSA just on premiums in ONE YEAR! I'm sure you are still a little worried about the $10,000 deductible thought so let's keep going.

A family member was having an operation and the total cost was going to be $25,000. Based on the above comparisons let's look at what a traditional health plans out-of-pocket exposure is vs. an HSA's out-of-pocket exposure.

TRADITIONAL PLAN

Cost of operation: $25,000.00

deductible: $2500 x 1 = 2500.00 (this based on one person. If another member of the family has to have a procedure, the deductible would have to be met again.)

Coinsurance $4,000 (but remember, you're maximum is your coinsurance x 3) $4,000 x 1 = 4000.00 (this too would have to be met if another insured member of the family had to have any type of procedure done)

Until they met their full deductible and Coinsurance amount, they were responsible for 20%. In this case, their complete out-of-pocket expenses = $6500.00 Lucky them! The Insurance company "should" now pick up the remaining $18,500. "Should" is in quotes because the insurance company still has the right to determine if the actual charges are "usual, reasonable and customary" and there IS the possibility that you will have to pay the difference of what the insurance company WILL NOT pay.

HSA PLAN

Cost of operation: $25,000.00

Deductible: $10,000.00

Coinsurance $ 0

Total Out-Of-Pocket expenses = $10,000

Now let's take it one step further. Here is an illustration that compares the REAL dollar difference.

                                              Traditional Plan          HSA Plan

Premium	$9600	$5040
Out  Of  Pocket	$6500	$10,000
Total	$16,100	$15,040

Wait...........we're not done with the math just yet! I think we would all agree that we spend a few hundred dollars a year on miscellaneous items that are not covered with traditional plans right? For example: If you have a copay and you went to the Doctor 3 times in a year and it was $20.00 for each visit then you need to add $20.00 x 3 = $60.00 to your out-of-pocket expenses. Oh and let's not forget; that $20.00 is per insured person. So.........using my clients scenario again, we can add another $60.00 to the bottom line which means they spent a total of $120.00 ($20.00 x 6 office visits) on Doctor visits alone. Here's the kicker though...........a copay pays for the doctor visit ONLY so if any other diagnostic tests or procedures need to be performed then you are responsible for the amount over the $20.00 copay. Unless of course your plan included some diagnostic testing, x-rays etc. Again, please understand the outline of coverage on your policy.

Let's do this again..................(based on my clients scenario)

                                                   Traditional Plan          HSA Plan

Premium	$9600	$5040
Deductible	$2500	$10,000
Co insurance	$4000	$ 0
Subtotal- Out of Pocket	$16,100	$15,040
CoPay/Dr. Visits	$120.00	$450**
Total	$16,220	$15,490

* $450.00 is due to the fact that with an HSA you do not have a Copay. The full office visit is payable and since we are comparing apples to apples, The scenario of 6 office visits was used with each visit costing $75.00 (please note ** with an HSA you do get repricing-this can be explained to you if you are interested in acquiring an HSA policy). In simple terms, it just means you save more money!

There is a difference of $730.00!! For only ONE person having to use their insurance. Also, anything you DO pay from your HSA goes toward your deductible. So, the above example of $730.00 would go towards their deductible.

If you had/have a traditional health plan and another insured member of the family had to have any type of procedure then you would have to start over with your deductible and coinsurance. With an HSA, you would have already met the deductible (there is NO coinsurance) and the expenses are paid 100%. Here are a few other facts one must consider when comparing a traditional plan vs. HSA's:With an HSA, you would be allowed to put the maximum amount (per the IRS) into your HSA account and earn an additional 6.15%. Side note:plans vary. These numbers are based on who I write my HSA business with. If you choose a different company, you may not get the same return or policy benefits. For an individual you are allowed $ 2900.00 and for a family you are allowed $5800.00 per year, tax free and tax deductible.

Now, go back and look at your current policy and find the paragraph that states you have the option of opening an HSA account and earn 6.15% on your money. You are TRULY in control of how you spend YOUR money on YOUR health care.

NOT THERE IS IT? hmmm....that's because when you have a traditional health plan you are renting your rights (benefits) from the Insurance company. When you have an HSA, you are owning your policy (hence the rate of return on your money of 6.15% in your HSA account-please remember my side note above regarding returns on your money). Another quick comparison would be owning a home vs renting. By owning a home, you are building equity and when you rent, you are simply paying them to allow you to reside there. Once you move out, your money is gone and there is no equity. Another quick question: When you pay your premiums and the Insurance company deposits your money, do you think they aren't earning money on your money? Let me make this real easy for you............ABSOLUTELY THEY ARE EARNING MONEY!!

Stop for one second and do a comparison. Compare the difference on premiums from a traditional plan vs. an HSA (its the first illustration I gave you). Most of the time its a fairly substantial amount. Now ask yourself if you would rather keep the difference for yourself or, would you rather give it to the insurance company? Sometimes, my clients feel more comfortable keeping a traditional plan and paying higher premiums. That is completely ok and you should NOT feel bad about that decision! Just make a decision that is best suited to your NEEDS and circumstances. HSA's are not for everyone just as PPO's are not for everyone (just as owning a home vs renting). Those decisions have to be made based on YOUR needs and YOUR comfort level based on your personal and individual situation. Do NOT let an agent tell you what YOU NEED! You decided.

Are your brain cells churning and your calculator humming? They should be!! Trust me, once you grasp the concept and truly understand insurance and how it works, you are well on your way to making much better decisions. My client that changed his policy was ecstatic that he will put an additional $4,560 in his pocket each year (this plan was definitely in his best interest based on his needs-and each person should make an informed decision based on their individual situation).

Here are a few things you need to ask yourself when determining YOUR NEEDS from a health coverage standpoint.

* Have you ever met your deductible in a calendar year?

* Do you frequently visit the Doctor's office?

* Do you take a lot of medications?

* Is there more than one insured in your household?

* Are you self employed?

* Do your rates keep going up? *by the way, there are policies that allow you to lock in your rates for up to 3 years!! That's a huge plus!

The UnInsurable

One Word Can Make A Difference

Most insurance companies follow this direction. It is up to you to truly read the "fine print" when it comes to understanding this part of the policy you may be interested in. I can tell you that there is one company that uses only the "Usual and Customary" as their primary basis for paying claims. This company has chosen to not pay claims based on "reasonable". This ONE simple word is what could change everything!! Another quick note: charges should be within the boundaries of your geographical area NOT on a National level). By using the word "reasonable", the insurance company can now use an 'open interpretation' of what is considered a "reasonable" charge. If they deem your doctors charges "unreasonable" you could be faced with some additional expenses out of your pocket.

Additional Riders and Benefits

Accident / Emergency BenefitsChemo and RadiationPreventative CareAir/AmbulanceDisabilityMaternityPrescription Drug Benefits Increasing your Lifetime Maximum

Here Is A Checklist

1.) Choose your deductible Is it a per insured deductible or a Family deductible? Makes a BIG difference with your out-of-pocket exposure 2.) What is Your stop / loss amount (Coinsurance)? And, How many times (typically up to 3). You need to ask! If an HSA fits your needs then this does not apply.

3.) What is the deductible for your sickness/accident benefit

4.)Do you want a PPO, HMO or HSA? Which one makes the most sense for your family? Remember to go through the list of questions I provided earlier to help you determine the best possible plan for you and your family.

5.) Determine the Out-of-Pocket percentage. 80/20, 70/30, or 50/50. If an HSA is what interests you then this does not apply.

6.) Find out what the Maximum per sickness or accident is. What is the deductible on this?

7.)What kind of Chemotherapy and radiation benefit?

8.)Do you need Maternity? If so, there is a waiting period!

9.)Do you want Dental and/or Vision discounts?

Summary

This pretty much concludes everything at this time. I hope that you have found this informative and will allow you to make the BEST decision for you and your family.

Like so many things, the insurance industry is constantly changing . I will keep you updated on the new things that are always evolving as well as new products that come into the market place if you have asked to receive my E-zine. If you missed that chance, here it is again.

There are several other links coming. Please be patient and as soon as they are up and running you will be notified ( if you have subscribed to my E-zine - you will receive the updates before anyone else). There are some great articles, information and updated reviews (not just on insurance - ugh! that would be boring) that can help anyone regardless of what they are going through in life. Trust me, we’ve all been there! You're bound to find something that can make a difference in your life.

Until next time,Best Regards and Here's to Getting informed!!Renee Rider

p.s I always stay up to date on the latest insurance news and when I find things that are pertinent and informative to my clients, I immediately pass this on! Sometimes you will find it interesting and relevant and sometimes not. If there are certain things you would like a more in-depth definition of or some resources, please let me know. I like to know what's on your mind! This is a very serious and sometimes overwhelming topic so don't go without the answers! You probably aren't the ONLY one wondering!

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