5 Things to Consider When Choosing Health Insurance Coverage

Full implementation of the Affordable Care Act is still two years away, and apparently it cannot come fast enough for many Americans. According to data from the U.S. Census bureau, the rate of uninsured persons in the U.S. has risen significantly in the last decade. As of 2010, more than 16 percent of Americans (approximately 50 million people) lack health Insurance coverage. And the trend is only getting worse for millions more who find themselves in the untenable situation of having health Insurance that is of low quality and little benefit.

According to CNNMoney, the majority of under-insured people in this country are comprised of three groups; “including foreign-born residents who are not U.S. citizens, young adults ages 19 to 25 and low-income families with an annual household income of less than $25,000.” While some of the first provisions of the Affordable Care Act have helped extend insurance to individuals age 19-25, the new law does little to help meet the demand for healthcare currently generated by the poor, elderly, and people who traditionally received health insurance through their employer.

A study from Harvard University reports that approximately 62% of personal bankruptcies in the U.S. are not the result of irresponsible spending habits, but rather a consequence by of skyrocketing medical costs. And the problem doesn’t just affect those who are uninsured, but those who are under-insured as well. The majority of people covered by insurance get care through their employers. But with a still sluggish economy, many employers are eliminating, cutting back on, or passing the costs of health insurance policies directly to their employees. All of this means that today Americans are paying more for lower quality insurance, which leaves these people in the same predicament as those who have no health coverage at all.

What’s worse, a recent evaluation of health plans by Consumer Reports found that many low-cost plans on the market intended for people with sub-optimum health, known as “mini-meds”, can only offer these plans at the expense of coverage. The result is that plenty of consumers who purchase their own insurance, or receive “discount” insurance through an employer, may find that their insurance could still leave them deep in debt if they experience an accident or illness. This virtual tug-of-war between insurance costs and coverage is one that should not be overlooked. In fact, it is important for anyone who is currently uninsured or under-insured to shop around for policies that meet both short-term and long-term cost/coverage needs.

Here’s what to consider when starting your search, and how to evaluate which plan may be right for you:

1. What is your current health situation?

One of the first things you should consider before purchasing any individual health insurance plan is the current state of your health. This is important for three reasons: First, while the Affordable Care Act prohibits insurers from rejecting or revoking coverage due to pre-existing illness, this element of the law does not take effect until 2014. Second, it’s important to be honest and upfront with insurers regarding your overall health (both at the time you apply, and past health history). If your health is less than ideal, or you have a chronic illness, any insurance you receive may include additional health-related surcharges, or be revoked entirely. This could leave you holding the bill for expensive procedures and medications you thought were covered. Third, it’s important to evaluate your health so that you may be able to take steps to improve it before applying for insurance. For example, if you smoke, you’ll want to try to quit. Or if you are overweight, consider dieting or joining a gym in order to demonstrate to insurers that your healthy lifestyle is genuine.

2. What should you look for in a plan?

The best health care policy will meet your current needs (e.g., do you need access to prescription medicine?), provide good coverage for future needs (e.g., does the plan offer maternity coverage?), and support you in the event of sudden injury or illness, all at a monthly price you can afford. Well, that’s a lot of (often competing and conflicting) factors to consider. The health care plans that are most likely to be worthwhile offer:

Coverage of various kinds of medical care, such as doctor visits, outpatient procedures, hospitalization, emergencies, prescription drugs, maternity care, and diagnostics.

The above elements are not meant to be exhaustive, but this list should give you an idea of the minimum parameters to consider when evaluating and comparing across plans.

3. Don’t select a policy based on premium price alone.

Your health insurance policy has to be affordable. First, if you have income restrictions, there are likely state and local providers of low-cost healthcare for low-income individuals and families in your area. Because eligibility requirements vary by agency, it’s important to visit your local government web site(s), or the federal government site Healthcare.gov, for further information.

A cursory look on the internet will produce plenty of sites offering free health insurance quotes, with some policies starting as low as $90. Most people find that they can afford these policies in the short term, making them look like a good deal. However, many consumers don’t realize that lower premiums always result in higher costs in other areas of your medical care; costs that you are unlikely to be able to avoid. These sorts of “down-the-road” costs on the cheapest policies typically include sky-high deductibles (ranging from $7,500-$10,000) and out-of-pocket limits, no prescription drug coverage, costly office visits, and no coverage for elective, diagnostic, outpatient, or even emergency care. When you consider all of the things you have to pay out-of-pocket for, that $90/month doesn’t look like such a good deal anymore.

4. Prioritize your health care needs.

Generally, most insurance analysts do not recommend policies with super-cheap premiums because they simply are not cost-effective. Okay, that’s obvious. But how do you choose amongst polices that are in the mid-range of prices (anywhere from $141-250 per month)? Well, this is where you have to be a little bit psychic. Specifically, in order to find the best plan for you, consider how you will use your plan. One easy way to do this is to consider how often, in the previous five years, you saw a doctor (if you previously had health insurance), or how often you would have seen a doctor (if you didn’t previously have health insurance). Since the Affordable Care Act mandates that preventative health screenings (like annual male and female wellness exams) are free, subtract these from your yearly visit calculation. For most well-insured people, it’s easy to presume they might see a doctor 2-4 times a year, not including the free preventative care visits. Thus, selecting a medium-range policy that offers a low ($10-$25) copay for the first 3-4 visits could reduce your medical expenses greatly, and keep you from spending too much out-of-pocket above your premium levels.

Another approach is to predict the sort of specific services you might need. For example, if you are a young healthy woman who does not plan to get pregnant in the near future, don’t consider policies that cover maternity expenses, and instead opt for a plan with low copay for generic drugs like oral contraceptives. Likewise, if you are a healthy male who takes a brand-name prescription medication for lowering blood pressure, select a plan that offers brand-name drug coverage. Both of the options described in these scenarios will likely result in increased monthly premiums, which is why it’s crucial to prioritize your needs, so you can find a policy that best matches how you plan to use your coverage.

5. Opt for a plan with a Health Savings Account (HSA).

If you typically only seek medical care once or twice a year, paying for a high-premium insurance policy may protect you in the event of an unforeseen illness or injury, but is not cost-effective unless something devastating occurs. But isn’t the point of insurance preparing for the unforeseen, you ask? Well, one way to anticipate and prepare for future medical care is to select a plan with low premiums, and high deductibles. These high-deductible health plans (HDHP) are becoming increasingly popular with both individuals and employers, because they provide an alternative to high premium coverage that has been traditionally offered.

In order to be eligible, the minimum high-deductible plan requirement for individuals is $1,200 a year. HSA’s set money aside for future medical care and medications. Anyone with an HSA can set up regular contributions from their paychecks to go directly into this account. What’s really great about these savings accounts, besides that fact that they help your money grow, is that because funds are taken out of your pretax income and placed in a tax deferred account, these contributions are considered above-the-line deductions for income tax purposes. Thus, if you must select a plan with a low premium, and high deductible, choosing a policy with an attached savings account is a great option.

by CreditQ Staff

Published 2/8/12 16:45

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