Sunday, October 27, 2013

Assessing Health Insurance Choices

It's open enrollment time for many employer sponsored health plans or better translated "pick and pray" time for healthcare in America.  And this year, Obamacare will pull in an entire new crop of victims (ur, I mean beneficiaries or is the politically correct term, "covered enrollees"?)  Welcome and good news, Affordable Healthcare Act enrollees, while this post references employee sponsored choices, you can apply this methodology in your healthcare quest as well.  This methodology considers risk and the interplay between objective and subjective.

1.  Compute your fixed costs among your choices.  Specifically, this will be your share of the premiums.  Simply stated, you don't have a choice in the matter; if you select the policy this is what you need to pay.  Among my choices there are a couple that have nominal "join" fees which are generally around $30 or so.  These are fixed as well - if you pick that plan you have to "join" and pay the join fee. When I compare these costs, I calculate for the entire calendar year.  Sometimes when you examine only the monthly amounts, differences do not seem apparent.   For example, you may see a difference such as $25 which you dismiss as "no big deal".  However, when you consider that the $25 difference is for 26 payments, you are paying $650 more; so don't be fooled by looking at just biweekly amounts.  Many will fall in a normative ("bell shaped") curve of cost.  Those falling on the extremes - very high or very low merit closer look.  Is that expensive policy really worth the extra cost or is the reason that other policy is so cheap is because coverage is very restrictive.

2.  Give backs and value added perks.  You must read the details of the offering to sift out provisions that give you more than a typical healthcare plan.  For example, under some High Deductible Health Plans (HDHP), part of the premium that you pay may be passed into a Health Savings Account (HSA) to be used for your healthcare.  For example, if $100 per month is passed through in this manner, you are being given back $1200.  Similarly, Consumer Driven Health Plans (CDHP) often provide a starting "pot" of money that is initially used to pay for your health care.  Most healthcare plans typically do not include dental or vision care, but some may have limited provisions.  For example, I have found some that include preventive dental.  This was an added perk with real value to me as a father in a family of 5. 10 dental exams, X-rays, and cleanings yearly can really add up.  I would estimate this added a value of about $1,000 to that plan for my situation.

3.  Most likely costs.  To calculate your most likely costs, you need to consider your known health history against what is provided by the plan.  For example, many traditional insurance plans have a deductible before anything (except mandated "preventive" care).  If your plan requires you to absorb $500 as a deductible before they will pay for care, you will probably want to consider the $500 as a likely cost.  Similarly, HMOs generally charge a "co-pay" for visits.  You should consider what a "normal" year looks like for you in regards to visits to a medical provider.  If your co-pay is $30 per visit and you estimate that you may see a doctor 4 times in a year, that is $120.  Needless to say, this can be more substantial if you have a known health need requiring frequent treatment such as allergies, physical therapy, etc.

4.  Individual risk assessment.  This is a critical area to assess, but the most difficult.  For most, a few extra visits to the doctor's office aren't going to financially wipe you out.  However, a substantial hospitalization can... even with insurance.  For example, we encountered an extremely stressful situation when, while on a HDHP, my wife was hospitalized.  Yes, that high deductible of around $3,000 right from the start kicked in and that 15% share that we had to pay AFTER paying the $3,000 packed a wallop as well.   My recollection is that AFTER we paid the $3,000, there was still a hospital bill of about $40,000 left, translating to another $6,000 that was our share.

Hospitalization is the big risk here.  Policies range widely from a set amount per day and then sometimes capped after 3 to 5 days to a flat percentage such as my example.  Some folks may know they are high risk for a hospitalization and some may not be as obvious.  For example, if you are over 50, you should consider the impact of a hospitalization - it can happen to you; don't delude yourself with denial or cute wit.  50 isn't just a number; nor is it the new 40 when it comes to gambling your financial health.  If you have active kids who enjoy sports you may want to consider your risk tolerance for worst case scenarios.

5.  Network provider panel.  While this may not have been apparent 20 years ago, it is a fact of healthcare now.  While some plans may be a little more generous than others (some may have no coverage for out of network care), in almost every case you will be on much firmer financial footing if you use network providers.  If you have established medical providers, it is worth your while to check that they are participating BEFORE you sign up for the plan.  There have been instances where I have called providers to verify and I also take the call as an opportunity to put out a feeler as to the provider's satisfaction with the plan.  Is your provider consider leaving the network?  If so, that is not a good sign.  You may also want to be a bit skeptical of the published provider directory.  I have found some insurance providers do not do a good job of keeping their list up to date, to include issues such as including providers who have left the plan, or identifying old service addresses (often triggering claims issues when the claim kicks because the provider's new address doesn't match their records), or having a panel that cannot handle capacity and where many are not taking new patients.

6.  Reputation of the insurance carrier.  Networking with co-workers, friends, neighbors really pays off.  I know of co-workers who are willing to pay considerably more to stay with carriers where they have established a track record of satisfaction.  There is a reason why United Healthcare has been on the MTQ Shit List more than any other.  They have been simply the worst claims payer that I have experienced.  To their credit, they outshine others by far when it comes to considering fixed costs, givebacks and value added perks which is why I have continued to subscribe.  If I believed that a normal year would include hospitalizations and the unquestionable claims battle that would follow, I would definitely select a different carrier.  A hospitalization is traumatic enough for the patient, family and finances without the added stress of needing to brawl with an insurance company when you are most vulnerable.

Happy hunting, folks.

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