Buying Health Insurance
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After reading JD’s account of his sick mother, I figured it would make sense if we temporarily stop from the series and talk about health insurance.
It’ amazing how many people think they can do without health insurance. They’re making a big mistake. If you’re uninsured, a series accident or debilitating illness can wipe out you and your family financially. And yes, young people get sick, too. In short, insurance that protects you against major health catastrophes is absolutely crucial.
If you’re like most working Americans, your employer supplies you with group health insurance coverage. The kind of health insurance that corporations have traditionally offered is a so-called fee-for-service plan. Such a plan covers visits to any doctor you choose. For an annual premium (sometimes paid by the employer, sometimes paid by the employee, and sometimes shared between them), group plans typically pay about 80% of your medical expenses after you pan an annual deductible of, say, $150 for a single person or $400 for a family of four. (A deductible is the amount you must pay toward your bills each year before your insurance kicks in. Once it does kick in, the small percentage of your medical expenses that insurance doesn’t cover and that you must pay for - is called your co-payment.) Luckily, many group plans limit your annual share of the bills to $2,500 or so, meaning that $2,500 is the most you should have to pay toward medical care in any year. Of course, if your plan excludes certain treatments, such as dentistry or drug abuse counseling, you’ve have to pay the entire cost yourself.
Trouble is, employer-provided health coverage is getting less generous. Fully one-tenth of the 633 employers surveyed by the Watson Wyatt human resources consulting firm upped medical deductibles for their employees in 1996. Translation: More of the cost of medical care is coming out of employee’s pockets. What’s more, a growing number of companies want you to kick in for the cost of the insurance itself. Some 15% of employers raised employee coinsurance or co-payments in 1996 and 12% planned to do so in 1997. Even once generous IBM has scuttled free health care for its 124,000 employees and their families, charging them @23 to $50 a month instead.
There’s not much you can do about such increasingly Scrooge-like behavior, short of banding co-workers together and lobbying for better coverage. But you can increase your chances of getting the right coverage at the right price by taking advantage of another trend: the growing tendency of employers to offer more than one type of health care plan.
The alternative to a traditional fee for service plan is a managed-care plan that restricts your choice of doctors. There are two main types of managed-care plans : health maintenance organizations (HMOs) and preferred-provider organizations (PPOs). HMOs are the strictest: typically, only visits to doctors who are members of their network are covered automatically-you must get approval to see outside specialist. By contrast, PPOs allow you to see specialist who are in their network and go out of networking, paying 20% of the bill. In general, HMOs don’t require you to pay a deductible; HMOs and PPOs cover preventive care, physical exams, and often extras like eye-glasses that insurer don’t cover; and you need not fill in those annoying claim forms that traditional insurers demand. When all is said and done, managed care plans are usually cheaper than fee-for-service plans. Moreover, most studies show that the quality of care that patients get is as just as good with a managed-care plan as with fee-for-service plan.
A new type of managed-care plan is called point of service, or POS. Run by insurers and HMOs, POS plans let you go out of network-for a higher price. You usually need a referral in order to see a specialist.
Which should you choose? If you care less about cost cutting and more about the ability to see whichever hot specialist you’ve heard about - or if you’re devoted to a current doctor who does not belong your company’s managed-care network-stick with your old fee-for-service plan. But understand that going with a managed-care plan will probably be cheaper. Even thought the monthly premiums you pay may be $6 to $20 higher, such plans usually charge co-payments of just $5 to $15 for doctor visits, prescription drugs and laboratory tests.
Among managed-care plans, PPOs and POSs tend to spell slightly higher out-of-pocket costs you than HMOs. It’s a simple trade-off: extra flexibility equals extra cost. So if you don’t have any tricky medical conditions or you have young kids and will thus likely take them in for lots of potentially costly checkups, an HMO is probably your best choice.
Sizing up a Managed-Care Plan
If your employer offers a managed-care plan and you nerd to decide whether to joint it, ask the following four questions:
1. How good are the doctors? First, get the plan’s doctor directory and see if there’s a doctor in it you know. If so, call the physician and ask his or her opinion of other doctors in the plan. That will give you a clue about the quality of the group.
2. What kind of preventive services are offered? Some plans figure you’ll get preventive care if you want. Others are more proactive, keeping records on patients and letting you know if, for instance, you’re due for a mammogram. The more the HMO or PPO watches out for you in advance, the more you can feel sure the group cares about your health.
3. What kind of accreditation does the group have? Two voluntary accrediting agencies have started to certify managed-care plans based on strict measures of quality. They are the National Committee for Quality Assurance (for HMOs) and the American Accreditation Program (for PPOs). This isn’t to say a good one. But one that has ponied up the fee to get accredited and then passed the standards demonstrates a quality plan.
4. What’s it really like to be a member? Ask the plan’s representative what kind of wait you might expect for an appointment. The average for a routine visit to an HMO is about four weeks. Find out, too, how old most of the patients are. If you’re about the typical age that means the doctors will be focuses on the kinds of medical issues that matter most to you. Finally, ask the doctor turnover. The average turnover for fee-based doctors, like the kind in PPOs, is 15% a year. It’s about 10% for salaried physicals, who tend to work at HMOs. If you learn that the plan’s turnover rate is much higher than those percentages that could be a signal that the doctors in the group aren’t very happy.
But what about those who are self-employed or unemployed? That’s what we’re going to discuss on the next post. Stay tune!
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