When it comes to their health, each person
and each family is unique, so it is not
surprising that choosing an individual
health insurance plan is a complex
process. Cost, convenience, and your
unique health issues all come into play.
Somehow, out of the myriad of choices, you
are supposed to find the right combination
for you. Here is a roadmap to simplify the
process:
1. Start at affordability. It is easy to
think insurance should cover every need
and contingency. Remember, it is there to
keep you from going into debt, not to put
you in debt. Set a budget that makes sense
and do the best you can within that
framework.
2. Proceed to your existing physician. If
you have a good relationship with your
current doctor and want to continue seeing
him or her, your choices may be limited
for individual health insurance. Find out
if your doctor is affiliated with an HMO
(Health Maintenance Organization), PPO
(Preferred Provider Organization), POS
(Point of Service), or IPA (Individual
Practice Association). If your doctor is
in one network, then your decision is
simple. If he or she is in more than one,
you can weight other plan features. If
your doctor is not in any network, you
will need a “fee-for-service” or
indemnity plan. Under this plan, you go to
any doctor or hospital you wish. An
indemnity plan normally will cover only a
percentage of the changes—usually 80
percent. You are responsible for the other
20 percent. The insurance company also
sets its own “usual and customary”
rates for services. If your doctor charges
more than the usual and customary rate,
you will have to make up the difference.
3. Signal your health issues. You will
need to inform the insurer of any medical
conditions for which you have been
diagnosed or treated. The insurer will
consider these “pre-existing”
conditions. If you were joining a group
policy, the insurance company would be
required by law to cover the pre-existing
condition without a waiting period,
assuming you had insurance coverage in the
previous twelve months. When you are
buying individual health insurance
coverage, however, the insurance company
has the right to declare a waiting period
for payments related to the pre-existing
condition or to decline to cover you at
all. Five states have made denial of
coverage illegal. Maine, Massachusetts,
New York, New Jersey and Vermont all have
adopted “guarantee issue” laws that
make insurance companies offer health
insurance to everyone regardless of their
medical conditions. Other states have
created insurance “pools” that provide
coverage to high-risk individuals.
4. Slow down for prescription drugs. If
you have found two or more plans that are
comparable, take a moment to review their
prescription drug benefits. Some plans
cover medications immediately, requiring
nothing more than a co-payment. Other
plans do not pay for prescription drugs
until the annual deductible has been met.
Be sure to compare the co-payment amounts
to see what the difference would be,
especially over time. Most insurance
companies cover medications on a
non-preferred for name brand drugs, but
others cover only generic brands (when
available). If name brands are important
to you, make sure you choose the plan that
offers them.
5. Watch for falling taxes. If someone
wanted to hand you a check for $2,539,
would you take it? That is what the Uncle
Sam is doing with Health Savings Accounts.
You can deposit up to $5,650 into a Health
Savings Account (HSA), sheltering it from
as much as 9.3% in state income tax, 28%
in federal income tax, and 7.65% in
Federal Insurance Contributions Act (FICA)
tax. That is a total tax savings of
44.95%, or $2,539 out of a $5,650
contribution. The HSA contribution rolls
over from year to year, and remains
tax-free, provided you withdraw the funds
after age 65 or use them for medical
expenses. In addition, the earnings on HSA
funds are tax-deferred. To open an HSA,
you must enroll in a High Deductible
Health Plan (HDHP), with minimum
deductibles of $1,100 for an individual or
$2,200 for a family. The deductibles are
paid with untaxed dollars from the HSA
account, increasing your buying power.
Because of the high deductible amount, the
monthly premium is low, making an HDHP
plan an attractive option for many
people.
By following this roadmap, you should
arrive at a choice that is relatively
simple to make.
