What is the major difference between group and individual insurance?The major difference between group and individual health insurance involves evidence of insurability. To purchase individual insurance, a person must generally answer a health questionnaire and undergo a medical examination to provide evidence of insurability to the insurance company. An insurer may decline coverage on the basis of the applicant’s personal habits, health, medical history, age, income or any other factors that bear on risk acceptance. Or the insurer may issue a policy with limitations on coverage. Most group insurance, however, is issued without medical examination or other evidence of individual insurability because the insurer knows that it can cover enough individuals to balance those in poor health against those in good health. The risk of an insurer failing to achieve this balance is diminished as the size of the group increases, or as the insurer underwrites additional group policies and increases the total number of individuals covered. This is known as the “law of large numbers.”
Back to TopWhat is a deductible?It is a specific dollar amount that an individual must pay (or “satisfy”) before reimbursement for expenses begins. The higher the deductible, the lower the cost of the health insurance plan.
Back to TopWhat is coinsurance?Coinsurance is a feature found in most health insurance plans. It sets forth the percentage of covered expenses that the individual and the health insurance plan will pay. The most common coinsurance level is one in which the individual pays 20 percent of the expenses and the insurer pays 80 percent. This is called 80 percent coinsurance. There are many different plans available with different coinsurance percentage requirements.
Back to TopWho should consider a high-deductible health insurance plan?If you’re healthy and have some money in the bank, you might want to consider a High-deductible health insurance plan.
The plans offer cost savings over plans because of the high deductible and they protect you from catastrophic health events.
If you’re in good health, rarely need prescription drugs, don’t have a pre-existing condition and don’t intend to get pregnant, you might consider a high-deductible plan.*
Under those circumstances, you won’t have many out-of-pocket expenses. Meanwhile, you can relax and enjoy the comfort of having protection against any unexpected and expensive medical costs.
The only caveat: You should put aside enough money (typically from $1,000 to $5,000, depending on your policy), to cover your deductibles in case of an emergency. That’s why pairing your high-deductible plan with an IRS qualified Health Savings Account (HSA) makes this combination attractive.
(*Note: Some plans have a one-year waiting period before they cover maternity care or pre-existing conditions.)
Back to TopWhat are potential drawbacks of a high-deductible health plan (HDHP)?One significant downside to a High-Deductible Health Plan (HDHP) is that you’re responsible for paying everything out-of-pocket until you reach your deductible (which typically ranges from $2,500 to $10,000 on these plans).
You’ll pay 100 percent of the cost of prescriptions, doctor visits and emergency room visits. You’ll also pay for the cost of surgeries and out-patient procedures.
If you’re considering a pregnancy, make sure there’s maternity coverage on your policy. There usually isn’t.
While a high-deductible plan can lower your overall health insurance costs while protecting you from unexpected and large medical bills, make sure you have your own plan to pay those initial out-of-pocket expenses. You’ll need a tax-deductible Health Savings Account (HSA) or your own savings plan to satisfy the deductible.
Research shows that people with high-deductible plans do cut their overall health care expenses. But they also tend to cut back on preventive health care such as childhood immunizations, cancer screenings and routine tests. This “penny wise and pound foolish” approach to medical care can be dangerous.
Back to TopWhat is short-term health insurance?Designed for healthy individuals and families, short-term policies provide an affordable safety net while switching from one life event to another without a health plan. Lose your job, recent college graduate, divorced, or retired and not quite eligible for Medicare? Then consider short-term insurance.
These plans generally cover you for one to six months and are often not renewable. But you can extend coverage to your entire family if you pay an additional fee.
Emergency events are nearly always paid for, as is hospital care, but in general, coverage is limited, so study your policy carefully. These plans don’t cover pre-existing conditions, nor do they pay for pregnancy or prescription drugs.
The price of short-term insurance is about half that of similar a longer-term health plans. A typical premium is $75 to $125 per month or about a third the cost of a COBRA policy.
Better yet, you can get coverage as early as the next day once you answer just a few simple questions about your health.
Bottom line: Short-term health insurance is a low-cost option to protect yourself temporarily from unforeseen and emergency medical expenses.
Back to TopWhat is a health savings account (HSA)?Want to save 50 percent on your health insurance? Make your medical expenses tax deductible? Cut your taxes $2,000 or more?
Take a look at a health savings account (HSA), which combines a tax-deductible savings account with a lower cost high-deductible insurance plan.
An HSA allows you to legally avoid federal income tax by depositing up to $3,050 a year for singles or $6,150 for families into a HSA account. There’s no minimum deposit, but whatever you put into your account by April 15 is an “above the line” tax deduction for the previous year’s income taxes.
Because the HSA is paired with a high-deductible health plan, your health insurance premiums are much lower than a typical plan that has a $500 deductible.
Use the tax-free savings to pay for doctor visits, hospital costs, deductibles, co-pays or prescription drugs. Once your deductible is met, health insurance covers your remaining medical expenses.
The savings from could be $5,000 or more every year. Over 10 million Americans are taking advantage of this investment that gives them control of their medical expenses.
Back to TopWhat is a preferred provider organization (PPO)?A preferred provider organization (PPO) is an association that contracts with a group of doctors, dentists, hospitals or other health care service providers to provide care at prearranged rates or discounts.
Back to TopWhat is a health maintenance organization (HMO)?A health maintenance organization (HMO) is a form of managed care that provides comprehensive health care to a voluntarily enrolled population at a predetermined price. Members pay fixed, periodic fees directly to the HMO and in return receive health care services as often as needed
Back to TopCan you keep your 20-something children on your insurance policy?The Affordable Care Act requires that – as of September 23, 2010 – most health insurance plans cover adult children up to age 26 on their parents’ policy. It applies to both married and unmarried children, but not to their spouses or children.
So it makes sense that you’re allowed to keep them on your health plan at work, right? Not necessarily. It depends on your company’s policy.
More than 1 million young adults remain insured because of this reform, according to government estimates. But if an adult child has access to another employer-provided health plan, your insurer can refuse coverage.
Check with your human resources department to find out what your plan allows. It might have broader coverage for adult children, allowing them to remain on your policy. That could save your kids some significant cash, especially when they’re embarking on their first career.
First do some comparison-shopping. Maybe your 20-something’s new medical policy offers broader, better or cheaper coverage than your own.
The rules will change in 2014 when all health plans will be required to offer coverage to an employees’ children until they turn 26, even if they have another offer of coverage through an employer.
Back to TopDo health insurance plans cover dental care?Proper dental care has been considered a budgetable expense, so traditionally, it has not been included in group health insurance plans. In the 1970s, as its cost increased, dental care – dental insurance or sometimes a dental discount plan membership – was added to employee benefits plans. Some plans include dental coverage as part of the medical plan; others include dental Coverage as a separate plan. However, many health insurance plans do provide coverage for noncosmetic dental work necessary as the result of an accident. Some plans include limited coverage for hospital room and board expenses related to dental procedures, such as removal of impacted wisdom teeth, performed in a hospital.
Back to TopWhat’s the difference between brand name and generic drugs?You probably know that generic drugs are a lot cheaper than brand name drugs, but you may wonder why. Are they lower quality? Less effective?
The FDA requires that a generic drug have the same active ingredient, quality and strength as the brand-name equivalent. The cost difference between brands and generics comes from the cost of bringing them to market.
A “brand name” drug is discovered, developed and marketed by a pharmaceutical company. Once discovered, the company quickly files for a patent to prevent other companies from copying and selling it. This gives them time to recoup research and development costs. On average, it takes $1 billion and 12 years for a single drug to travel from research lab to patient. That’s why brand names are more expensive.
Generics only become available once the patent expires – usually after 10 to 17 years. Then, other drug makers can step in and market the brand as generics. Because generic drug companies don’t have to recover research, development and marketing costs, generics are less expensive.
About 70 percent of prescriptions dispensed in the U.S. are generics, and using a generic drug is a great way to save money. For example, a popular brand name blood pressure pill costs $150 for a 30-day supply. A generic version costs $16.
If you have prescription-drug insurance, your copay for a generic is likely much lower than that for brand name drugs. For example, in a common “three-tier” copayment structure, you might pay $15 for a generic, $35 for a preferred brand, and $65 for a non-preferred brand.
If your doctor writes you a prescription, ask if a generic is available and appropriate for your condition.
Back to TopDo I need special health insurance when traveling abroad?Most health insurers — including basic Medicare — don’t cover any costs outside the country.
Some insurance policies do (Including some Medicare Advantage plans), but with limitations. Ask your current insurer if your policy covers you and your family while traveling abroad.
If not, consider supplemental insurance, available for as little as a few dollars a day. It’s often bundled with trip cancellation insurance and can be purchased directly from suppliers or through travel agents and tour companies.
Travelers may be surprised to find that payment is required on the spot and, in some countries, even before treatment. Medical evacuation back to the U.S. can cost as much as $100,000. So don’t take the risk.
That’s why the State Department recommends looking for medical policies that guarantee their payments abroad, pay directly to foreign hospitals and foreign doctors, and have a 24-hour support center.
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