10 tips for replacing health insurance coverage

by Tony Novak, MBA, MT, OnlineAdviser at Freedom Benefits revised 11/16/11

Changing health insurance is a ritual part of changing jobs, graduating from school or starting your own business. Internet-based insurance exchanges now make the task easier and less expensive than in the past. These general tips can help you find fast, affordable and reliable coverage online:

1. Avoid changing health insurance companies if you have a serious medical condition. Instead, contact your current insurer directly to ask about “continuation of coverage” options. Don' t assume that the current group insurance carrier does not have an option that would work for you. Almost every health insurance company offers some type of individual conversion option from group plans when coverage is not available under the law known as COBRA. Insurance companies that issue individual policies are generally not required to immediately pay for the cost of treating pre-existing medical conditions. If you have serious medical conditions and must change health insurance companies, then learn about the state-mandate or assigned risk health plan in your state. These are listed on a state-by-state basis at FreedomBenefits.net.

2. Think short term. Most people who buy their own health insurance change their coverage in less than a year. Buy the insurance that offers you the best deal and coverage now without as much concern for whether it will be the best choice in a year. Health plans are evolving rapidly and so next year we may have an entirely new generation of health plan choices available. The plan that you bought more than a year ago would not likely represent the best value anymore. Use short-term medical insurance plans, student medical plans or foreign travel insurance plans if you qualify for coverage periods up to 12 months at a time. These offer better deals if you qualify.

3. Choose a higher deductible. By taking a deductible of $1,000 or more, you will save more than $1,000 in premium payments over a year' s time. For most people the savings you achieve easily outweighs the additional financial risk. At these higher deductibles, high quality coverage often becomes affordable. For example, a health insurance premium for a healthy 50 year old male is about $200 per month with a high deductible of $5,000 but would cost more than $500 per month if I lowered the deductible to $500.

4. Combine online technology with personal professional support. Health plans change on a month-to-month basis now during the implementation period for federal and state reform laws. Online pricing and enrollment is great, but check your options manually with a knowledgeable adviser. One Web site user, for example, was told that she was not eligible for coverage with one of the nation' s largest health plans last week and after a our brief phone conversation and follow-up e-mail, we determined that a change in her state' s insurance laws makes her eligible this week. Professional input is especially important if you have a pre-existing medical condition. You can avoid being declined for coverage by learning, in advance, the details of each insurance company' s medical eligibility criteria as it pertains to your specific medical situation. This detail is not yet available through automated insurance resources.

5. Choose major medical insurance and avoid the mini-meds whenever possible. Popular "scheduled benefit" policies, sometimes known as mini-med plans, should not be your first choice, regardless of how attractive the benefits look in advance. In the event of a serious medical problem you will appreciate the better protection offered by major medical insurance.

6. Take a separate policy if you travel outside the U.S. Most U.S. plans provide weak foreign travel benefits and most worldwide plans provide weak coverage in the U.S. so it is best to carry separate plans tailored to your travel schedule. Short term international policies are inexpensive and designed to include features like translation services that relieve typical stresses when medical treatment is necessary while away from home.

7. Be aware of state-specific issues where you live. Each state controls its own health insurance laws. Four example, four states including Massachusetts, New Jersey, New York and Vermont make it nearly impossible for its healthy individual residents to buy low cost health insurance at rates that are lower than those paid by high risk applicants with serous medical problems. Healthy residents of those four states must be prepared to pay more for health insurance than those who live in other states. Other equally odd rules apply to insurance in other states throughout the country. Understanding your state' s specific insurance rules can help you find the best health insurance options.

8. Pay for several months of coverage at once whenever possible. Quarterly or semi-annual billing is less expensive than month-to-month billing. Since most plans accept credit cards, it even makes financial sense to “charge it” at a lower premium rate and then pay off your own credit card over a few months. The savings in insurance cost will be more than the credit card finance charges. Be aware that a few health insurance plans do not issue refunds if you cancel before the end of the period of paid coverage.

9. Never cancel your old insurance coverage or decline a COBRA conversion option. Instead, allow these to expire on their own as time and laws dictate.

10. Use a Health Savings Account. Pay for out-of-pocket expenses with tax-deductible money. Health Savings Accounts require a specific type of high deductible insurance. Once enrolled in the insurance, there are typically no additional costs to set up an account. More information on Health Savings Accounts can be found at HealthSavingsAccount-HSA.com.

10 tips for replacing health insurance coverage

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