by Tony Novak, CPA, MBA, MT
Changing health insurance is a ritual part of changing jobs, graduating from school or starting your own business. Health insurance market reforms through the Affordable Care Act have not made the process any easier or less stressful. The simple questions "What are my insurance operations?" can still be addressed only with a complicated response. The complete response right now is even quite a bit more complicated than before health care reform took effect. Health plans are evolving rapidly and so next year we will likely have new choices that are not available today. Internet-based insurance exchanges now help make the pricing and enrollment part of the process easier but still leave many gaps in information that may be important. The following tips are designed to help you find fast, affordable and reliable coverage by filling in gaps of information that is not typically shared by insurance enrollers:
1. Try to avoid changing health insurance companies if you have a serious medical condition. Instead, contact your current insurer directly to ask about “continuation of coverage” options1. Some health plans offer a type of individual conversion option from group plans when coverage is not available. The health plans of larger companies are required to offer this option under the law known as COBRA. More information about COBRA is available on the web site www.cobraplan.com2. 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 on state-specific web pages at FreedomBenefits.net.
2. Think short term. More than half of all people who buy their own health insurance have change that coverage in less than a year. Many keep their coverage for a few months. This is especially true for the many who need to start coverage outside of the window of time designated as an open open enrollment period on an insurance exchange. In those cases, it is better to buy the insurance that offers you the best deal and immediate coverage right now, especially when the savings are substantial. 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 plans do not count as "qualified coverage" for purposes of meeting Obamacare rules. This means that you may owe a tax penalty if you keep a short term coverage for more than three months.
3. Don't worry about a higher deductible. Realize that the odds of a healthy person incurring claims that exceed the policy deductible are small, regardless of the policy deductible chosen. For most people the savings you achieve easily outweighs the additional financial risk. For example, a health insurance premium for a healthy 50 year old male is about $250 per month with a high deductible of $5,000 but would cost more than $450 per month with a deductible to $1,500. Since we know that about 4 out of 5 healthy individuals will not have medical costs exceeding $1,500 in any given year, the odds are that the applicant will save money with the higher deductible plan by pocketing the $200 per month savings. In the event that you do incur higher claims, almost all medical providers would allow you to pay the uncovered bill at a pace of $200 per month until the deductible was paid.
4. Combine online technology with personal professional support. Health plans change every month now during the implementation of federal and state insurance reforms. The simple question ""What are my health insurance coverage options?" actually has quite a complex answer. Online pricing and enrollment technology is much improved since the beginning of online insurance exchanges, but you will still gain valuable information and tips if you check your options manually with a knowledgeable insurance adviser affiliated with the exchange. 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. My firm is affiliated with agents that operate the nationwide service called "Members Insurance Exchange" and separately offers consumer advice not affiliated with any insurance exchange through a service called "OnlineNavigator". Both services offer expanded personal professional help at no additional cost to the consumer.
5. Choose major medical insurance and avoid the mini-med policies whenever possible. Highly popular scheduled benefit policies like Core Health Insurance, sometimes known as "mini-med plans", should not be your first choice, regardless of how attractive the benefits look in advance. These policies do not provide the "minimal essential benefits" as defined and required under Obamacare. In the event of a serious medical problem you will appreciate the better protection offered by a major medical insurance policy.
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. Each state still controls its own health insurance laws. Availability of coverage and the cost of coverage vary widely based on location. Understanding your state' s insurance rules and markets can help you find the best health insurance options but this information is not widely available through online resources. This is another good reason to consider tip #4 above.
8. Pay for several months of coverage at once whenever possible. Quarterly or semi-annual billing is often a little less expensive than month-to-month billing3. Since most health 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. Do not cancel your old insurance coverage. Instead, allow older unwanted policies to expire on their own for failure to pay premiums. We see many example of consumers who change their mind after obtaining replacement coverage and then need to return to a former policy. This reversion is possible only if the prior coverage has not already been cancelled by the policyholder and reinstatement is still possible as allowed within the premium payment "grace period".
10. Use a Health Savings Account. Pay for out-of-pocket expenses with tax-deductible money. Health Savings Accounts (HSA) require a specific type of qualifying high deductible insurance; this will be shown clearly when you are shopping for coverage. Once enrolled in the qualifying insurance, there are typically no additional costs to set up a HSA account. More information on Health Savings Accounts can be found at HealthSavingsAccount-HSA.com.
1 Conversion coverage availability was affected by health reform laws and is still in a state of flux. We should not assume that an insurance company's current policy conversion rules will be the same as in the future.
2 The author has a financial interest in COBRAplan.com and the other web site resources listed in this article.
3 For 2014 most insurance companies changed to a monthly billing option only to accommodate the launch of the health insurance exchanges. This is likely to revert back to offering multiple payment options in the future.
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Opinions expressed are the solely those of the author and do not represent the position of any other person, company or entity mentioned in the article. Information is from sources believed to be reliable but cannot be guaranteed. Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues or a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Tony Novak operates as an independent adviser under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator" but is not a representative, agent, broker, producer or navigator for any securities broker dealer firm, federal or state health insurance marketplace or qualified health plan carrier. He has no financial position in any stocks mentioned. Novak does work as an accountant, agent, adviser, writer, consultant, marketer, reviewer, endorser, producer, lead generator or referrer to other companies including the companies listed in the articles on this web site.