Do Your Homework to Ferret Out an Individual Policy
When you work for a big company offering health insurance coverage, the employee benefits department floods your mailbox with brochures and notices about the open season for picking a health plan. You can spend hours reading all sorts of literature about your choices among HMOs, PPOs and the whole alphabet soup of modern medical care.
The task is much more daunting if your firm doesn’t provide insurance, or you are a soldier in the growing army of entrepreneurs, consultants and part-timers. It’s tough trying to make a living and worrying at the same time about how to get the best deal on insurance.
Careful shopping can pay off, and professionals can help you. Strategies will vary, depending on your family situation and your health.
If you are in good shape and single, for example, go for the high-deductible coverage. A 30-year-old Los Angeles resident might pay a premium of $200 a month for a health plan with a $500 deductible--that means you pay the first $500 of bills each year before the insurance kicks in. Boost the deductible to $2,500 a year and the cost of the insurance falls dramatically to just $100 a month.
However, if you have a spouse and a couple of young children, you can expect the family to cope routinely with colds, ear infections and maybe a virus or two to keep you running to the doctor’s office. For this family, a no-deductible plan might be the best. It would cost about $300 a month.
Another possibility for the healthy, and affluent, consumer is the Medical Savings Account, which combines health insurance with a tax-free savings account. It’s available to the self-employed and workers at companies with 50 or fewer employees that don’t provide coverage.
The MSA’s yearly deductible for health insurance ranges from $1,500 to $2,250 for an individual, and from $3,000 to $4,500 for a family. At the same time, you deposit in a tax-free savings or investment account a sum of cash equal to a share of the deductible--up to 65% for an individual, or up to 75% for a family.
The money in the tax-free accounts can be withdrawn to pay for medical bills before the annual deductible is reached. If you don’t use it, the cash in the account piles up, gathering interest and can be used for bills the next year. Some financial institutions may allow the accounts to be invested in mutual funds. If you have enough money to pay the medical bills out of pocket, you can simply let the MSA pile up tax-free, just as in a regular Individual Retirement Account.
Some membership groups, such as college alumni associations, fraternal organizations and trade associations, may offer health insurance. Check very carefully before buying one of these products. Be wary of any deal that seems too cheap to be true--if the pool of covered people insured through the organization is too small, a few big bills could send rates soaring the next year.
And find out if the organization is simply selling you an individual policy or whether it acts as a group, enrolling you in group coverage. You have more rights as a member of a group if you go out later to buy another policy.
When you begin the search for coverage, contact an insurance agency that handles health coverage. Look for knowledgeable and experienced people. An agent who belongs to the National Assn. of Health Underwriters may have had additional training in the intricacies of insurance. Some carry the designation of Registered Health Underwriter.
Tell the truth. Don’t make the mistake of thinking your minor health problems won’t raise a red flag at the insurance company. “We constantly get people who say, ‘I’m perfectly healthy,’ yet they take several prescription drugs,” noted William Shanbrom, who runs the William Shanbrom & Associates agency in Ojai. “Maybe they have a bad back, and they haven’t yet sought surgical treatment. Maybe they are asthmatic. All these can cause underwriting problems.”
Insurance companies can medically underwrite--that’s a fancy word for charging a lot more to the high risks, the sick people who can run up medical bills. And the company can reject you entirely.
For people who have some health problems, or an ailing spouse or children who might run up big doctor’s bills, it might be better to avoid the vagaries of the market and instead embrace the protections offered by federal and state laws.
“Remember that health insurance coverage is an avenue to health care--you don’t want to be off the road,” warned Alan Katz, senior vice president of Blue Cross of California, the state’s biggest marketer of individual policies. “God forbid that you or someone in your family comes down with a serious ailment, and you don’t have coverage. If you know you are leaving a job, start looking before the job ends.” A key source of help is the federal Consolidated Budget Reconciliation Act. This law assures continued coverage for those who lost their participation in group health insurance because their job situation changed.
COBRA, covering companies with 20 or more workers, allows individuals to keep their group insurance despite layoffs, firings, divorces, death of the breadwinner or the maturation of a child who is now too old to be covered as a dependent.
Suppose James gets fired by the ABC widget company. Under COBRA, he can keep his company health insurance for 18 more months, but he has to pay the full cost of the premium--the worker’s share and the employer’s portion--plus an administrative fee of 2%.
Janet has coverage through husband Sean’s health plan at work. They divorce. Janet can buy the coverage from Sean’s company for 36 months for herself and their children.
The state’s version of this law, called Cal-COBRA, extends the protection to companies with two to 19 workers. The individual has to pay the full premium plus a 10% administrative fee.
Cal-COBRA also has a special protection for older workers who leave a company but are too young to qualify for Medicare, the federal program for those older than 65. If a worker is at least 60 and has been with the company for five years, he can extend his corporate group insurance for a full five years, giving him an umbrella of protection until Medicare takes over. This particular provision of Cal-COBRA covers firms with 20 or more workers. On Jan. 1, the coverage expands to companies with two to 19 employees.
Check the rates by using COBRA--in which case you pay to maintain your old coverage--and by comparing it with other policies available in the open market. But price alone isn’t the final determination. “If the family has doctors they want to stay with, you’ve got to be sure the insurance plan they pick includes those doctors,” said Bill Robinson of National Business Insurance in West Hollywood.
Many of the people using COBRA to extend their coverage will find jobs with other employers offering group insurance.
But what about those who are moving from the group umbrella to individual coverage? They have become self-employed or joined firms without any insurance.
They have federal protection under the Health Insurance Portability and Accountability Act, which guarantees the right to buy individual insurance regardless of health condition. But it’s a mixed blessing. The product is offered, but the price may be significantly higher for those with health problems.
An individual is eligible for the guaranteed issue after using up COBRA coverage. But don’t wait until the last minute. If there is a break in coverage of 63 days or more, the HIPAA rights evaporate.
Start looking for the individual policy several months before your COBRA period ends. Go to an agent and “get as many quotes as you can,” said a federal health-care official.
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Question: My wife and I are expecting our first child in mid-February. I am a nonexempt employee at a midsize firm, and my wife and I have medical coverage through my employer. At the time of our child’s birth, I would like to take one month off to be with my wife and our newborn child, preferably without having to tap into my sick or personal time. Are there any laws that would protect me in this decision, assuming a normal pregnancy without any complications?
Answer: The federal Family and Medical Leave Act allows you to take up to 12 weeks of unpaid leave to bond with the baby. If you want to be paid during the time off, you will need to use your personal leave time or vacation. Any FAMLA leave must be taken within a year of the birth.
* Send your questions, worries, tips, successes or failures in living with the health insurance revolution to Benefits Bob Rosenblatt, Health, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. Or e-mail: bob.rosenblatt@latimes.com.
