Health Insurance

If you have been let go from your company or are self-employed, buying personal health insurance can be daunting. As much a necessity as home and auto insurance, health insurance has dozens of providers touting hundreds of plans.

The recently unemployed can purchase this coverage in the form of COBRA, which is basically buying the old company’s plan directly. This option provides continuous coverage and sticker shock, as the individual suddenly realizes the true cost of their employer’s heavily subsidized health insurance. Premiums are high because the insurance company takes into account all the people they must insure (employees and their families). That’s the bad news.

The good news is, if reasonably healthy, one can buy a personal health insurance policy for considerably less. Before hitting the open market, understanding a few basic health insurance terms and pricing parameters is a must and will go a long way towards picking a plan that fits you the best.

There are primarily two types of plans: one deductible and coinsurance plans. One deductible plans are usually very straightforward. The insured agrees to pay for all medical out of pocket expenses (at a discounted PPO rate) until they have reached the policy deductible limit. Once met, all other expenses are then picked up by the insurance company. Coinsurance plans also have a deductible. On top of that, once the deductible has been paid, the insured must also pay a portion of all remaining bills (typically 20%) until they have met the coinsurance limit, which can be anywhere from $2,000 on up. For example: an individual has a coinsurance plan with an annual deductible of $2,500, and a coinsurance limit of $3,000. Worst case scenario, the insured pays a total of $5,500 for the year. After that, the insurance picks up the remaining bills 100%. FINE PRINT ALERT: most coinsurance plans for families are x 2; meaning a family on this plan will have to pay two deductibles and two coinsurance limits before insurance covers the rest.

So what is a Co-Pay? I love this term. It’s more “insurance speak”. A Co-Pay is a pre-determined dollar amount you pay for doctor visits and is not applied to any deductible or coinsurance limit. It’s like a cover charge to see the doctor. One could conceivably fork over $10,000 in deductible/coinsurance fees and still pay $30-$45 a pop for the privilege of seeing their doctor.

Generally, the higher the deductible and coinsurance limits are, the cheaper the monthly premium will be.

Keep in mind we are discussing Major Medical Plans. Thanks to the recent health care law, newly issued major med plans have no cap on what the insurance company has to pay for medical claims after deductibles/coinsurance has been met. Non Major Medical insurance is when the insurance company has a cap on what they will pay, and the insured has to pick up the rest. If at all possible, always choose a major med plan, since the open-ended financial burden rests with the insurance company, not you.

Now armed, venture into the open market and find a policy that fits your needs the best. The quickest, easiest, and cheapest way to do this is to work with an insurance broker to shop for you. Good brokers will have access to multiple insurance companies and should find the best rates and plans available. By contrast, working with a direct writer (Blue Cross / Humana agent) limits your choices because that agent can only provide their company’s policies.

Remember: make sure you are choosing a major medical plan. If an agent is “selling” a family insurance plan for $50 a month, chances are it is not major med, and you could still suffer horrendous financial hardships from skyrocketing medical bills.

Kirk Gaertner

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