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Evaluating Medical Insurance

Question: My adult children (mid-20s) have individual medical insurance. After my son’s recent hernia surgery, on which the company paid very little--many charges are not “eligible,” according to their point of view--we decided it was prudent to change insurance companies.

However, it seems impossible to learn anything about other companies to make a judgment. They will only quote prices and send out fluffy little brochures. I have been unable to learn of comparative studies by anyone such as Consumer Reports. A morning spent at the Santa Monica Library and many phone calls have been worthless.

Basically, how can we know which companies pay what charges when medical expenses are incurred? I will appreciate any help you can give us.--N.S.

Answer: You’ve walked into a jungle of uncharted paths with incomplete or conflicting “trail signs” on the trees. The consensus of my sources is: No study of comparative costs, benefits and exemptions exists.

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“It’s my understanding,” says Robert Hunter, president of the Virginia-based National Insurance Consumer Organization, “that some of the state insurance departments have such studies, but, of course, they’re not available to the public and would be of pretty questionable value anyway.”

“The trouble is,” echoes Bruce Fried, executive director of the Washington-based National Health Care Campaign, “that there are literally hundreds of such companies, and they are constantly changing the terms of their policies. What might make sense one day might be obsolete a couple of months later.”

Comparing ‘Gap’ Coverage

The closest approach to what you are looking for is the annual comparison published by Senior World of California of El Cajon, but which, unfortunately, isn’t applicable in your case because it studies only the companies (and HMOs--health maintenance organizations) offering so-called “gap” health insurance for Medicare patients. And here, of course, comparisons are possible because the actuarial lines are more clearly drawn--care is offered only to those over 65 already receiving Medicare coverage. The same sort of coverage for the population-at-large--all ages and without the back-up coverage of Medicare parts A and B--gets into a real mare’s nest of variables.

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“We’re talking about big numbers here,” Hunter adds. “We’ve got about 37 million people completely uninsured on health matters and probably another 40 or 50 million grossly underinsured--holding policies, perhaps, that pay hospital costs of $50 or $100 a day, which is meaningless.”

Reconcile Yourself

How you, as an individual, can protect yourself against unforeseen medical expenses boils down, the experts say, to reconciling yourself to a) high costs and b) compromise.

“As an individual,” Hunter adds, “you’ve got to approach it as comprehensive coverage against a catastrophic injury or illness and with the highest possible deduction you can afford. There’s not much room for comparison shopping with a $500 deductible. At $1,000 you will start finding some significant breaks in premiums, with the company picking up 80% of all necessary and reasonable costs above that. And, with a $5,000 deductible, the premiums can be quite reasonable. Unfortunately, how many of us can afford a $5,000 deductible?”

Hunter’s advice: “While, again, it’s not cheap, a good HMO is frequently the best bet. At least it offers relatively total coverage and generally will tend to be cheaper than the more extensive individual policies. If an HMO isn’t your bag, you can still use it as a rough yardstick. Get an HMO quote and then shop around among individual companies. If you find one with premiums substantially under the HMO, watch out.”

Voice Against Individual Coverage

Fried, whose National Health Care Campaign is a study group that believes the country’s health insurance situation is a shambles and which probes all proposals being advanced to improve it, takes a somewhat different approach.

“Our advice to people seeking individual health coverage is--if at all possible--don’t do it. Find yourself an organization offering group coverage. There are far more of them out there than most people realize. Not just employers. Practically all professional and vocational organizations offer them, but a surprising number of others do too--fraternal groups, special-interest groups, organizations such as the AARP (if you’re over the age of 50), some credit unions, churches and even some social groups.

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“The trouble is,” Fried continued, “that most of them have to be dug out by asking around. As far as I know, only some of the insurers have a list of such groups and, of course, they’re not going to publicize such information. Almost always, though, such group policies are a better deal than individual policies.”

Wide Variations

Failing there, Fried concedes, an HMO may be the best bet “if you can feel comfortable with it. But they have to be checked out pretty carefully--there are wide variations in quality.”

Fried also expresses some surprise at your dissatisfaction with your son’s insurance company.

“By most yardsticks--what they take in in premiums, what they pay out in benefits, and their loss-ratio are better than most individual companies. They also have a built-in appeal mechanism that seems to work very well.”

Indeed, though, there aren’t any easy answers to the question of individual health insurance. No handy check lists, no comparison charts; only, as you discovered, a lot of “fluffy little brochures” and a lot of sweeping claims.


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