Health Insurance, General

Insurance Q.& A. : Health Insurance, General

What kind of health insurance should I get?

Like so many things when it comes to insurance, that depends. If your employer (or spouse's employer) offers a group plan that insures all of its employees, you can probably save a lot of money by taking part in it. If you don't have access to a group plan-or if the choices available through the group plan don't fit your needs-you will have to buy an individual policy that will probably cost more. Group plans are not only cheaper, but many also let you choose from a range of services. You don't have to pay for coverage you don't want. Under a group plan, you're automatically eligible for coverage and cannot be dropped or charged more if you get sick. However, depending on the plan, the coverage may only reimburse you for a fraction of your actual medical bills. You may be limited as to which doctors you are allowed to visit, and your employer can raise your share of the premiums or even drop the plan anytime it wants. If you buy an individual plan, regulators in most states monitor price increases and might even have to approve them before they are passed to you. Many individual policies also allow you to visit any doctor or other specialist you like. However, the plans are generally more expensive than group plans, the insurer itself has greater latitude to cancel your coverage, and some have relatively low maximum payout levels that could mean you'll run out of coverage if you're involved in a major accident or suffer a prolonged illness.

What types of health-related insurance should I avoid buying?

When buying health insurance, it's important to remember that you want to purchase the broadest coverage possible. A good, broad policy will cover just about every medical problem you encounter, regardless of how you get it or where. As a result, you can usually avoid "narrow" insurance policies that will pay only under unusual circumstances. According to Net Worth: Creating and Maximizing Wealth with the Internet (Jamsa Press, Las Vegas), here are some health-related policies you can probably live without: 1. One-disease insurance. Once you have broad coverage for every major health risk, any other coverage for a specific disease is redundant and a waste of money. 2. Accident insurance. These policies pay specific medical expenses resulting from an accident, rather than expenses resulting from illness. Again, this is redundant coverage because a standard health policy should cover health expenses resulting from either accidents or illnesses. 3. Health policies pitched by celebrities on TV, with premiums that appear to be unusually low. These policies usually have extremely long waiting periods before they cover any pre-existing conditions -- far longer than the waiting periods required by underwriters who don't have to pay for expensive advertisements and celebrity endorsements. 4. Policies sold through unsolicited mail that offer spectacularly low rates. Many of these policies also have unusually long waiting periods for pre-existing conditions. 5. Student health insurance. Chances are, your student is already covered under your family health policy until he or she is 18, or for as long as the student stays in school. Check your policy and call your agent. 6. Most indemnity policies. They pay you a flat rate, sometimes a mere $50, for every day you spend in the hospital. That's not very helpful, considering that the average daily rate at many hospitals now tops $500.

What does the Medical Information Bureau do?

Few people have ever heard of the Medical Information Bureau, but there's a good chance that it knows all about you. The MIB's main job is to catch people who falsify their insurance applications. If an insurer knows that you had heart surgery, it will likely report this to the bureau. If you later apply for medical or life insurance but fail to mention the operation, a quick check with the MIB can uncover it. The result: Your application may be declined, or the insurer may insist on a higher premium. The MIB is just one good reason not to lie on an insurance application. Even if an untruth slips through the cracks, the company that writes the policy can later cancel the agreement or even refuse to pay a claim if it can show the policy was issued under false pretenses.

What are open-enrollment periods for group health plans?

A few insurers, have open-enrollment periods for membership in group health plans for a month or two every year. During this time, plans will accept new customers who want to change insurers. Those who aren't insured at all also qualify for coverage during the open-enrollment period even though their application might be rejected at other times of the year. However, if an employee declined to participate when coverage was first offered, they can be charged higher rates if their health is poor.

How does COBRA affect my group insurance coverage when I leave a job?

If you leave your job, you can keep the insurance offered by the company's group plan for up to 18 months. Your right to obtain this extended coverage is guaranteed by a federal law, the Consolidated Omnibus Budget Reconciliation Act of 1985, whose acronym is COBRA. Details vary from state to state, but COBRA generally allows you to purchase insurance through your employer's group plan for the same price the employer pays (plus 2% extra to cover administrative costs). If you're disabled, your COBRA rights last for 29 months. Buying COBRA insurance isn't always a great idea. If the company you work for offers a medical plan, it's probably paying at least part of your premiums for you. If you left the company, your employer would no longer be required to subsidize your payments. So, under COBRA, you'd pay the full tab yourself, which can be hefty. You might want to exercise your COBRA rights and stay with the plan if you can't get coverage elsewhere, or if the coverage is the cheapest and best that you can obtain. You will need to shop the market to determine the best alternative.

What do I do if I'm getting divorced and I'm covered by my spouse's health insurance?

One key issue that divorcing couples must consider is how the separation will affect their health-insurance coverage. If one spouse in insured through the other spouse's employer, COBRA will allow continued coverage for approximately 18 months in most cases. The coverage cost plus up to 2% will be billed to the discontinued spouse. According to "The New Century Family Money Book" (Dell Publishing), "Divorcing couples need to assure that they are adequately and continuously covered by health and medical insurance. The obligation to provide health insurance coverage is often included in the separation agreement. If one ex-spouse is fully insured under Social Security, the other is entitled to Medicare at age 65 as long as the ex-spouse is also age 65 or over (even if he or she is still working) or is dead." An ex-spouse may also be eligible to collect full Social Security disability benefits if the other spouse is eligible.

What is HIPAA and what are its benefits?

The Health Insurance Portability and Accountability Act (HIPAA) went into effect on July 1, 1997. It protects an insured person's insurability. Before this law, if an insured person lost insurance coverage for some reason, losing a job for example, he or she could be required to prove insurability before obtaining new coverage. For most people this wasn't a problem; however, for people with chronic health problems or whose health deteriorated while they were covered, it was a serious problem. Such people lived in constant fear of losing their jobs and thereby losing their health insurance. Now, if a person has been insured for the past 12 months, a new insurance company cannot refuse to cover the person and cannot impose preexisting conditions or a waiting period before providing coverage.

I'm a college student. Do I need to buy my own health insurance?

Many young adults don't realize that they still may be covered by their parents' health insurance after they go off to college. According to "Get a Financial Life" (Simon & Schuster), "If you're a student, you may still be covered by your parents' policy. Some employer-sponsored plans allow children of employees to be covered until age 23 if the children are still in school." If your parents receive notice that your coverage is about to lapse, the federal COBRA regulations allow them to extend it for up to 18 months.

Can I make penalty-free withdrawals from an IRA to buy medical insurance?

Losing your job is bad enough, but those problems can be compounded if your medical insurance disappears along with your paycheck. Since 1997, some workers who lose their jobs have been able to make penalty-free withdrawals from their Individual Retirement Account (IRA) to defray the cost of buying medical coverage. According to J.K. Lasser's "Your Income Tax" (Macmillan General Reference), "After 1996, unemployed individuals who have received unemployment benefits under federal or state law for at least 12 weeks may make penalty-free IRA withdrawals to the extent of medical insurance premiums paid during the year. The withdrawals may be made in the year the 12-week unemployment test is met, or in the following year. However, the penalty exception does not apply to distributions made more than 60 days after the individual returns to the work force." Self-employed persons -- who are ineligible for unemployment benefits -- now can also make penalty-free withdrawals from an IRA to pay their insurance premiums.

Why do I need medical-payments coverage under my automobile insurance policy?

The medical-payments coverage in a typical automobile insurance policy covers your medical and hospital bills (up to a certain dollar amount) if you or a passenger is injured in a car accident. You may need to purchase the coverage, even if you have a separate health-insurance plan. According to "Get a Financial Life" (Simon & Schuster), "If you live in a no-fault state, you probably will be required to buy a minimum amount of medical payments coverage, typically called 'personal injury insurance' or 'no-fault insurance.' It covers your medical bills (and in some cases your loss of income if you are disabled) regardless of who is to blame for an accident. "If you live in a 'fault' state, you are usually not required to purchase medical payments coverage, but you may want to anyway. Accidents in which no one can be proven negligent won't be covered by liability insurance, and liability insurance will not cover your own injuries in accidents that you have caused." If you already have good health insurance, you won't necessarily need medical payments insurance to cover your own medical bills. But you may want to consider purchasing it if you often have passengers in your car.